RGESS Equity Scheme for first-time investors


In the last Union Budget, the finance ministry had introduced Rajiv Gandhi Equity Savings Scheme (RGESS) to encourage first-time investors to take some risk and to spread the equity cult far and wide across the masses. A tax saving avenue in its true sense, the scheme’s main objective is to boost ‘equity culture’ among the new generation. It seeks to enable the beginners to park funds in approved mutual fund schemes and/or listed shares.

RGESS was introduced with dual benefits of understanding and investing in selected equities and enjoying tax benefits for select investors. The scheme is applicable only to individuals. Thus, the benefit of tax deduction is not available to any other category of taxpayer.

Amending the earlier provision of tax benefit only in the first year of investment in the scheme, Finance Minister P Chidambaram, in his recent Budget 2013-14 speech, has extended tax benefits to three successive years.

Salient features of Rajiv Gandhi Equity Savings Scheme:

  • Applicable only to individuals
  • First-time investors can invest up to Rs 50,000
  • Deduction from income will be at the rate of 50% of the amount invested in equity shares.
  • There would be lock-in period of three years
  • The deduction is available for the first three years

To be eligible to invest in RGESS, an individual should have an annual income of not exceeding Rs 10 lakhs. Any new retail investor who has not opened Demat account or who has opened Demat account but not made any transaction until before 23 November 2012, can invest in the scheme.

Now, the question is how to go about investing in RGESS? To start with, first-timers are required to open a demat account and designate the demat account for RGESS by submitting the duly signed Form A, available with brokerage houses. One can invest in any of the eligible mutual funds or stocks in lump sum or in installments during the year in which the deduction is to be claimed. Although, any amount can be invested through the demat account, tax benefit will be available only on an investment of up to Rs 50,000.

When you invest under the scheme, the investments would be subject to ‘lock-in’ during the first year. From the second year onwards, you can sell the units of securities if you maintain the minimum amount for which you have claimed income tax benefit. If you fail to maintain the minimum amount, it will lead to reversal of the tax benefit availed.

Apart from providing tax rebate, the scheme would generate healthy and consistent return through the high growth potential of equity investments. Therefore, if you are a beginner and wish to play the equity ball game, investing in RGESS would be a good start. Exclusively meant for first-time investors and seeking to provide tax benefits to them, the scheme aims to bring in more participants in the securities market.


1. Views as are mentioned in the article are personal views of Author and nothing to link with Co., its Director and Employees.

2. All investments are subject to market risk and you need to consult your financial advisor/consultant before investment

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