Section 80CCG – Rajiv Gandhi Equity Saving Scheme

Rajiv Gandhi equity scheme is for a new retail investor and also for those investors who have opened the demat account but have not made any transactions in stocks and/or derivatives till the date of notification.

Under Rajiv Gandhi Equity Scheme following investments in stocks are allowed;

  1. Stocks listed under the BSE 100 or CNX 100 or
  2. Stocks of PSUs which are Navaratnas, Maharatnas and Mini-ratnas
  3. Follow on public offerings of the above companies mentioned in 1 and 2 above would also be eligible
  4. IPOs of PSUs having annual turnover of Rs. 4, 000 crore for each of the immediate past three years listed in the relevant financial year
  5. Exchange traded funds
  6. mutual funds that have above eligible securities as their underlying and are listed or traded in the stock exchanges and settled through a depository mechanism have also been brought under the scheme.

Section 80CCG - Rajiv Gandhi Equity Saving Scheme

Section 80CCG is applicable from assessment year 2013 – 2014 onwards. Deduction under section 80CCG is available to a resident individual if his gross total income does not exceed Rs. 10, 00, 000.

Deduction under section 80CCG is available only if, the tax payer is a new retail investor as specified in the notified scheme and has acquired listed shares in accordance with the notified scheme. Such investment has locked in for a period of 3 years from the date of acquisition in accordance with this scheme.

If conditions under section 80CCG are satisfied then deduction of 50% of amount invested in equity shares is available. However deduction under section 80CCG can not exceed Rs. 25, 000.

If after claiming deduction under section 80CCG, the tax payer has failed to satisfy any of the conditions mentioned in this section then the deduction originally allowed earlier shall be deemed to be the income of the tax payer of the year in which default is committed.

Deduction under section 80CCG is a one time deduction i.e. if the deduction has claimed in assessment year 2013 – 2014 then the same deduction can not be claimed in future.

However from assessment year 2014 – 2015, this section has been amended to permit the deduction for 3 consecutive assessment years beginning with the assessment year relevant to the previous year in which the listed equity shares or listed united of equity oriented fund are first acquired.

Note: Out of the lock in period of 3 years, the first year is blanket lock-in period, commencing from the date of last purchase of securities under the scheme. From the second year onwards, whatever the value of stocks/units sold by the investor from the scheme portfolio, securities of the above nature of at least the same value are credited back subsequently. However, the investor is allowed to take benefit of the appreciation of his portfolio, provided its value, as on the previous day of trading, remains above the investment for which they have claimed income-tax benefit.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.