RGESS - Is it Good One for Tax Planning?

Rajiv Gandhi Equity Saving Scheme ( RGESS) is s a new equity tax advantage savings scheme for equity investors in India. The scheme got it's approval on September 21, 2012. It is exclusively for the first time retail investors.

The investors who invest up to Rs.50,000 in 'Eligible Securities and MFs' and have gross total annual income less than or equal to Rs.12 Lakhs will benefit from a new section 80CCG under the Income Tax Act, 1961 on 'Deduction in respect of investment under an equity savings scheme' has been introduced to give tax benefits.
Example:
Let us say, you invest Rs.50,000 under RGESS, the amount eligible for tax deduction from your income will be Rs.25,000. Alternatively, if you invest Rs.40,000 under RGESS, the amount eligible for tax deduction will be Rs.20,000. So you may save about Rs.2,575, Rs.5,150 for income tax slabs 10% and 20% respectively under this scheme.
Who can invest in it ?
 Individuals who have never invested in equity markets are eligible . Definition of such individuals is as under:-
- Person who hasnt opened a Demat Account.If Demat is opened , then there should be no transactions.
- Person who hasnt invested ever in equity -cash and FnO.
-Resident individual having annual income of less than 12 lakhs.
- The second or third holder of the demat account would not be considered as investor having equity exposure . Its only the first holder who shall be considered that way. hence all such people can open a new demat account and take advantage of this scheme.
Is it worth it? 
 It is worth it because of following reasons:
- Helps you save taxes over and above Sec 80 C to the extent of Rs 25000 as direct deduction from taxable income , if your annual income is less than 12 lacs pa.
- It allows you to take advantage of tax saving even while investing in well diversified Mutual Funds. Of all the tax saving instruments available in India today, ELSS is the best one owing to its low cost and low lockin period besies high return potential. RGESS is just like ELSS only and as such makes sense to invest in it and save extra taxes.


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