More detail about (RGESS) Rajiv Gandhi Equity Saving Scheme

After a long waiting for which instruments would be made available for investing in the (RGESS) Rajiv Gandhi Equity Saving Schemes, SEBI finally has come with norms and clarified it through a recent circular, which securities will be eligible scheme. It is clarified that the following securities would be considered eligible for RGESS. The following investment product would be eligible for this scheme:

(A) Close-ended mutual funds (which are traded and listed on stock exchanges)

           (B) Exchange Traded Fund (ETF) except Gold ETF

          (C) Equity shares of BSE-100 , CNX-100, Maharatna, Navaratna and  Miniratna Public Sector Undertakings (PSUs)  including their Follow-on Public Offers (FPOs) and only those IPOs of PSUs with Government stake not less than 51%, having revenue of Rs 4,000 crore in the last three years                                   

RGESS scheme provides a 50% tax rebate to new retail investors or first time investors who invest upto Rs 50,000 in the aforesaid eligible securities and whose annual income is below Rs 10 lakh. RGESS has an overall lock-in period of 3 years, but investors are allowed to sell / pledge / hypothecate their securities after the expiry of the mandatory lock-in period 1 year. The period after the end of the mandatory lock-in period, which is called as the flexible lock-in period can be used to trade in the eligible securities provided you as a new retail investor ensure that the demat account under the said scheme is compliant for a cumulative period of a minimum of 270 days during each of the two years of the flexible lock-in period. If investments done in instalments then 1 year mandatory lock-in and 2 years flexible lock-in period would be consider from last investment date.

The Government in its notification has permitted  grace period of three trading days from the end of the financial year so that the eligible securities purchased on the last trading day of the financial year also get credited in the investor’s demat account and such securities shall be deemed to have been purchased in the financial year itself. However, the deduction claimed will be withdrawn if the lock-in period requirements of the investment are not complied with or any other condition of the scheme is violated.

Now the question, who is eligible for this scheme as a new or a first time investor. It would be certified by the depositories to that an investor is a new investor or first timer. They have the power to seek information from exchanges on investor transactions through their RGESS designated demat account. After the expiry of the period of holding of the investment of RGESS,the demat account automatically converted into ordinary demat account.

By this scheme government has attemped to increase retail participation in capital market and helped them to create wealth creation through long term investment.

If you have any query regarding investment please feel free to ask.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com