Save 5k using Rajiv Gandhi Equity Savings Scheme (RGESS) – Sec 80CCG

November 16, 2012Save Money


(Updated 28 Dec’12) Tax payers were overjoyed when our Finance Minister, in his budget speech of 2012, announced a new avenue to save tax – by investing in direct equity. The announcement was ambiguous and lacking in detail. Hence, everyone new that they could save tax by investing in stock market but no one knew the modalities and restrictions.

Then in Sep 2012, Finance Ministry issued a detailed note outlining the features and clauses of the scheme. In this post, I’ll make an effort to explain it in layman’s language bereft of any jargon. ๐Ÿ™‚

The scheme is named as ‘Rajiv Gandhi Equity Savings Scheme‘ (don’t understand why everything in this country gets named after the Nehru-Gandhi family :x). The objective of this scheme is to divert people’s savings into equity markets and promote equity culture generally among small investors.

This scheme comes under section 80CCG of Income Tax Act 1961.

If you don’t have time to read the full post, following is an explanation of this scheme in 4 lines:

Under โ€˜Rajiv Gandhi Equity Savings Schemeโ€™ โ€“ย a new equity investorย will be able to claim 50% of his investment in direct equity as deduction subject to maximum investment of Rs. 50,000 and provided his taxable income is below Rs. 10 lacs. The investment will be subject to 3 years lock-in.

Key features ofย Rajiv Gandhi Equity Savings Scheme (RGESS)

  • The scheme is open to new equity investors only. They will be identified on the basis of their PAN numbers. If you already have a demat account but you have never made an transaction in it (equity/derivative) before the date of notification of this scheme then you are eligible for deduction under this scheme. Also, if you are a second holder in a demat account but don’t have any account in your name, you can open one to claim deduction under RGESS. (Which is the best demat account? check here)
  • Your taxable income should be less than or equal to Rs. 10,00,000
  • You can invest a maximum of Rs. 50,000 and a deduction of only 50% ๐Ÿ™ will be allowed. Hence, the maximum deduction you can claim in a year is Rs. 25000 (something is better than nothing :))
  • You can invest in:
    1. Stocks listed under the BSE 100 or CNX 100
    2. PSUsย which are Navratnas, Maharatnas and Miniratnas
    3. Follow-on Public Offers (FPOs) of the above companies
    4. IPOs of PSUs, which are getting listed in the relevant financial year and whose annual turnover is not less than Rs. 4000 cr for each of the immediate past three years
    5. Mutual Funds and Exchange Traded Funds that have above stocks as their underlying investments and are transacted through demat account.(If anyone has compiled a list of stocks eligible under this scheme, please share)
  • ย You need not invest the full amount in one-go. You can do it in smaller chuncks as per your convenience.
  • Lock-in period is 3 years. Out of which, the first year is blanket lock-in.
  • After the first year, you can start trading the stocks that you have bought under this scheme. However, care should be taken that you maintain the amount of investment that you have claimed at any point of time. ย That means, if you have claimed deduction on 50k investment, the total value of shares in your account should not fall below 50k at any point of time in these two years. Basic principle being that whatever amount of stocks you sell, equal amount of stocks should be bought by you.
  • ย Valuation of shares will be on the basis of closing price of previous day.
  • In case you break any of the rules stated above, the tax benefit will be withdrawn.

I think Rajiv Gandhi Equity Savings Scheme is a good option to save additional 25k in taxes. However, not everyone would be able to benefit from it. So if you are an existing equity investor (like me), you will not get any benefit from this scheme :(. However, there are other ways to save taxes which I have explained here.

Update 8 Dec 2012: SEBI in its circular dated 6 Dec 2012 has asked stock exchanges to list stocks, mutual funds and ETFs that qualify under RGESS on their website.

Update 28 Dec 2012:ย List of stocks eligible under RGESS (put out by BSE) – Download here.

I hope this article would have answered a lot of your queries about RGESS. If there is anything which has not been answered here, please do let me know in comments below and I’ll try my best to answer the same. You may also add if I have missed any point.

If you found this post useful, do tell your friends about it by sharing it on Facebook, Twitter or Google+ using the buttons below. Thanks in advance ๐Ÿ™‚

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About Naimisha Parekh
Online shopping addict, personal finance advisor, mother and a loving wife :)
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103 Responses to “Save 5k using Rajiv Gandhi Equity Savings Scheme (RGESS) – Sec 80CCG”

  • Tax Planning - How to save tax in FY 2012-13 (AY: 2013-14)
  • Divya November 16, 201211:25 pm

    Thanks Naimisha for such a detailed note on RGESS. This scheme has been a little confusing to understand with all the conditions. But after reading your post, I am clear.

    Thanks again ๐Ÿ™‚

    • Naimisha November 17, 20123:41 pm

      Thanks for your kind words Divya!

    • Nagaraj January 13, 201310:08 pm

      Me too. Thanks

      • Naimisha January 14, 201310:32 am

        Thanks Nagaraj ๐Ÿ™‚

  • arun sharma November 17, 20124:02 pm

    enquiry about Rajiv Gandhi Equity Savings Scheme (RGESS) โ€“ Sec 80CCG”

  • jinalshah November 18, 20128:12 pm

    It will really help if you can provide a list of all stocks valid under this scheme

  • anil kumar November 26, 20127:56 pm


    • Naimisha November 26, 20128:03 pm

      Rajiv Gandhi Equity Savings Scheme is different from Infrastructure bonds.

  • Dipen November 27, 201212:15 pm

    Is this within the 1Lac tax saving bracket or in addition to that?
    Also one more thing… you mentioned “you can save 25K”
    But, I believe this 25 K will be applicable for “deduction” from net income and if one falls in 20% bracket (which is the max limit) so, one can save 5K… isn’t it??

    • Naimisha November 27, 20122:07 pm

      1. It is in addition to 1 lac under 80C
      2. Point taken. Article updated.

  • sanjay kumar November 29, 201210:08 am

    i have a Demat a/c in icicic bank since 2010 and i have taken shares, MF & infrastrure bond through demat. in 2010-11 & 2011-12. now i want take MF under RGESS. please advise me in details

    • Naimisha November 29, 201210:26 am

      Bad luck Sanjay, you do not qualify for claiming deduction under RGESS. You are an existing investor.

  • Vimal December 5, 20128:13 pm

    Hi Naimisha,

    Please let me know the procedure to invest in
    Rajiv Gandhi Equity Savings Scheme (RGESS) โ€“ Sec 80CCG, I dont have any DMAT till now.


  • nishu December 10, 20129:20 am

    I want to open dmat account newly for the purpose of RGEES.

    Can u kindly suggest which shares i can buy? I know PSUs etc are eligible.
    But i want to know exclusively. One such company i though is ONGC.

    • Naimisha December 10, 201210:17 am

      Nishu, wait for a few more days. SEBI has instructed stock exchanges to list the companies whose shares are eligible under RGESS. I will update the list here once the same is published.

      • nishu December 10, 20121:26 pm

        Awaiting for response..

        • Naimisha December 28, 20127:07 pm

          The list of eligible scrips has been uploaded. Download from above.

      • nishu December 11, 20121:33 pm

        In which bank it is bettr to opn DMAT Acnt?
        Wat r the points to b taken care while openin acnt?
        I hav saving bank acnt in SBI..But frens r tellin not to open dmat acnt in it..

  • himanshu December 11, 201210:30 am

    hi naimisha
    thanks a lot for adding to my knowledge , and my qus. is tat I ahave invested in ELSS direcly for last 3 years BUT i dont have dmat acc. am I eligible for RGESS
    thanks { taxfree ๐Ÿ™‚ } in advance ,

    • Naimisha December 11, 201210:53 am

      Investing in ELSS does not disqualify you from RGESS. You can go ahead with opening your demat account ๐Ÿ™‚

  • Rachit December 13, 201211:02 am

    Hi Naimisha,

    I have a demat account, which i just used once to subscribe for the Coal India IPO. Will i be eligible for RGESS??

  • yusuf ali December 21, 20121:49 pm

    i have a demat acount since 2011,i am trading thorugh i eligible for RGESS investment through this demat account or i have to open a new demat acount?….pls help earliest.

    • Naimisha December 25, 20124:31 pm

      You are not eligible even if you open a new account.

  • AJIT JOSHI December 21, 20122:32 pm

    Is investing in rajiv gandhi equity saving scheme is included in 1 LAKH normal or extra benefit for tax exemption clear it

    • Naimisha December 25, 20124:23 pm

      It is over and above 1 lac exemption under 80C

  • vivek December 27, 201212:34 pm

    thanks for the vital information about rgess,could you give us the detail of mutual funds under this scheme.

    • Naimisha December 27, 20121:15 pm

      The list is not out yet. Will update once I get the information ๐Ÿ™‚

      • Naimisha December 28, 20127:09 pm

        The list of stocks eligible under RGESS is available now. Download it from above.

  • vivek December 29, 201210:48 am

    thanks for the detail of scripts under rgess,do you have the list of mutual funds under rgess.

    • Naimisha December 29, 201211:00 am

      Don’t have the mutual fund list as yet. Will upload here once I get it ๐Ÿ™‚

  • vivek December 29, 201210:56 am

    i had a demat account in hdfc bank around 5 years back then i closed my account. am i still eligible for rgess ?

    • Naimisha December 29, 201211:01 am

      Did you buy anything in that account? If not, you should be elgible. But not sure.

  • Gaytri January 7, 201311:11 am

    I have a question. I already have a Demat account, but I just purchased some IPO’s 3 years back and after that I did not transact from my Demat Account. At present even, I dont know abott the status of my Demat account. So will I be eligible for this scheme.

  • nishu January 8, 20138:36 am

    Hi Naimisha,

    Thanq for uploading the eligible stocks list. I would like to know
    1.which segment is the best option to invest? (ETF/ Stocks / Mutual Fnd)

    2. Is it advisable to invest in parts in all the three?

    • Naimisha January 8, 201310:30 am

      There is no exact answer to your questions. You should invest in a segment that you understand properly.

    • nishu February 12, 20132:55 pm

      Hi namisha,

      I am planning to buy shares in the following.
      1. Maruti Suzuki Pvt. Ltd
      2. Sun Pharmaceuticals
      3. HCL technologies

      Are all the above eligible for RGESS?

      Moreover, i am working in a PSU. Already i am undergoing TDS . Our finance told they do not take care of RGESS. I have to file it in personnel so as to get that 5k back from IT-dept.

      I doubt whether it come back / not.

      • Naimisha February 12, 20133:42 pm

        Please check the list of eligible securities above.

        You can file your return personally and if there is a refund due, you will surely get it.

  • Himadri January 8, 20138:59 am

    Very good information Naimisha.

    • Naimisha January 8, 201310:30 am

      Thanks Himadri ๐Ÿ™‚

      • Jagadish January 12, 20133:36 pm

        Hi planning to save tax this year, which will be best iam not looking for long term say short term 5 years

        • Naimisha January 12, 20137:06 pm

          3yrs ELSS or 5 yrs fixed deposit

  • Namdeo Rao January 11, 201311:39 pm

    Hi, Nimisha,
    have gone through all comments and your replies.It is so clear that i had no question to ask you. Thanks.
    Namdeo Rao

    • Naimisha January 12, 20137:01 pm

      Namdeo, you made my day! I like your comment the best. Thank you ๐Ÿ™‚

  • jitendra January 12, 201311:46 am

    Can we take this benefit of RGESS by investing in Gold ETF, or GOLD fund. If yes then –then is there any specific gold ETF under on which this scheme will be applicable.

    2. If someone open demat account through any share brokerage house (sharekhan , indiabull etc etc) then also this scheme is applicable.


    With Regards


    • Naimisha January 12, 20137:02 pm

      1. No. Gold ETF/Fund not allowed so far.

      2. Yes.

  • Vijyendra Shukla January 13, 20134:16 am

    Dear Naimisha,

    If someone have old Dmat Account for which AMC is paid, but first transaction is made after April’12 then RGESS can be opted for exemption.



    • Naimisha January 14, 201310:31 am

      Yes, provided the scrip purchased belongs to eligible list.

  • SURINDER GOEL February 1, 20136:04 pm


  • sumeet February 6, 20139:06 am

    plz tell me the documents to b submitted for income tax rebate under RGESS

  • sumeet February 6, 201312:06 pm

    how much tax cud b saved under RGESS

  • sumeet February 7, 201310:22 am

    hi , i had opened a demat account to apply for ipo of reliance power , i was alloted shares , tranferred them to someone else account n closed the dmat account , am i eligible for RGESS ?

    • Naimisha February 7, 201311:07 am

      I think you won’t be eligible. But do take second opinion.

      • sumeetkocher February 11, 201312:51 pm

        thnx naimisha

  • rvpatil February 19, 20132:53 pm

    my taxable salary income is above 11 lakhs will rgess help me?

  • PRASAD KHANDEKAR February 20, 20135:31 pm

    My demat A/c is not operated since it was opened , can invest to get tax benefit under this section? Since equity is purchased on market price,how and which amount is considered for 50% tax benefit? Hoe to show the amount so invested in tax return?

    • Naimisha February 20, 20136:12 pm

      You will be eligible. The amount you actually invest will be considered for deduction and not the market price.

  • Pavan February 24, 201311:10 am

    Thanks Naimisha for your valuable input on RGESS. This was simple yet very clear. Hope to hear some more topics from you. Good job keep it up…

  • Anuj Saxena March 7, 20138:15 am

    This is SUPERCOOL Naimisha.. Thanks for your nice tips !

    • Naimisha March 7, 201310:12 am


      • Anushree March 13, 20135:43 pm

        I have purchased a rgess MF. Now I want to purchase some more rgess stocks. Would the second purchase eligible for tax benefit?

        • Naimisha March 13, 20136:53 pm

          Yes, provided it within the maximum allowed limit.

  • Arun R March 15, 201311:57 am

    Very useful info, explained very clearly.. Even who is new to investment also can understand very well…

    Thanks a lot ๐Ÿ™‚

    • Naimisha March 15, 20132:19 pm

      You made my day, Arun ๐Ÿ˜€ thanks a lot !!

  • kuldeep singh March 16, 201312:49 pm

    hi ami

    i just want to know that for HRA deduction. i have to produce rent agreement or rent receipts will be enough for getting deduction?


    • Naimisha March 16, 20134:56 pm

      Receipts are all you require.

  • S.Ramachandran March 26, 20137:21 pm

    I had opened a NON TRADING DEMAT account only in my name with Sharekhan, only to convert my very old shares in physical form and subsequently transfer all those to the Dmat TRADING Account in the joint name of my wife and myself, with my wife’s as the FIRST. Most of the electronically converted shares have now been sold out and we never purchased any shares thru this trading account till this day.

    After transferring the shares to our joint trading account , the non trading account in my name was closed without any further transaction.

    I will be happy if you can clarify whether I will now be eligible to open a trading account in my name and invest in Rajiv Gandhi Scheme to qualify for tax deduction.


    • Naimisha March 27, 20135:17 pm

      This is a complicated case open to interpretations. From what you’ve said, my understanding is as follows: Old physical shares were in your wife’s name and they were converted to demat form and sold off.

      In such a scenario, your wife will not be eligible for deduction under this clause. However, you will be eligible ๐Ÿ™‚

      • S.Ramachandran March 27, 20138:08 pm

        No madam. Some old physical shares were in my single name. I had to open a non trading account with sharekhan to convert to electronic form.
        After conversion those shares were transferred to our Joint Trading account(with my wife as the first name) and sold.

        My non trading account was closed

        Most our shares have now been sold out. We never bought nor intend to buy shares

        The whole exercise was to dispose of all our old shares( around 15 -20 years old), as we both are senior citizens.

        I am a tax payer now and want to reduce my tax liability by investing in Rajiv gandhi scheme. Is it possible.

        • Naimisha March 28, 201310:48 am

          I am not sure about your case. Would suggest you consult some tax expert or CA.

  • naveen April 25, 201312:45 pm

    Hi ,

    1) my company has 80ccg, but how can I show a proof to the company that I took a shares of worth 50k.

    2) I do not have any demat account till now planning to open. Is it mandatory to submit Form A to depository participant.

    Nice Day ๐Ÿ™‚

    • Naimisha April 25, 20136:07 pm

      The broker will send you purchase receipt. You can use the same as proof of purchase.

      Please suggest what is form A for. I am unaware ๐Ÿ™

  • sheela June 10, 20136:45 pm

    I don’t have a demat account. But I have invested in ELSS and other mutual funds directly last year. Will I be eligible for the RGESS tax benefits?

    • Naimisha June 10, 20138:07 pm

      No ๐Ÿ™

      • sheela June 10, 201310:50 pm

        I have heard that investing in ELSS does not disqualify you.. so is it the investments in other mutual funds that changes my eligibility?

        • Naimisha June 11, 201311:01 am

          Normal mutual funds won’t qualify. Only specific RGESS mutual funds qualify.

          • sheela June 11, 201311:14 am

            I understand that part. What I’m saying is that When someone else said they had already bought ELSS for 3 years but didn’t have a DEMAT account, you replied that they would qualify for RGESS.
            When I said that I invested in ELSS and normal mutual funds but don’t have a DEMAT account, you said I’m not eligible for RGESS.
            So the difference between the two cases is my investment in non-ELSS mutual funds. IS this investment making me ineligible for RGESS? That is my question.

            • Naimisha June 11, 20139:19 pm

              Normal ELSS mutual funds do not qualify for deduction under 80CCG. For availing deduction under 80CCG you need to invest either in stocks directly (for which you need a demat account) or invest in mutual funds launched specifically for 80CCG (for which demat account is not required).

              Hope this clarifies.

              • sheela June 11, 201310:54 pm

                I’m sorry for not making myself clear earlier. Now I understand the confusion.
                I wasn’t asking if my existing mutual fund purchases will get me the RGESS benefits. I was asking if I am eligible to invest under RGESS (since people who have already invested directly in IPO’s or other stocks cannot claim the deduction even if they invest in specified stocks/funds).
                If my existing ELSS purchases and normal mutual fund investments make me ineligible for RGESS benefits, I would invest in them. But if I can get the benefits of RGESS, I will open a DEMAT account and invest in the appropriate stocks/mutual funds.

                • sheela June 11, 201310:56 pm

                  Sorry, a small typo in the above message.
                  If my existing ELSS purchases and normal mutual fund investments make me ineligible for RGESS benefits, I would “NOT” invest in them. But if I can get the benefits of RGESS, I will open a DEMAT account and invest in the appropriate stocks/mutual funds.

                  I forgot the NOT in the above statements.

                  • Naimisha June 13, 20137:01 pm

                    If I understand correctly, you have invested in normal mutual funds and ELSS funds. In such scenario, you can go ahead and invest in RGESS securities (Demat route or mutual fund route) and take advantage of the deduction available ๐Ÿ™‚

  • Rahul July 11, 20131:24 pm

    Hi Naimisha,

    1) I am holding a DMAT in XYX Bank and done trading Prior to April 12.
    So I am not Eligible right ?

    2) If I open another account in ABC Bank and Buy some RGESS.
    Can I get the IT Benefit ?

    3) My Wife is not having any DMAT Account Can I have some RGESS on her name and Claim Benefit ?

    Please Help ..

    • Naimisha July 11, 20132:49 pm

      1. Not eligible
      2. No
      3. Yes

  • Sidharth August 4, 20138:00 am

    hi…I have 2 demat accounts, one that was opened in May and another that was opened in July this year. Which one can I use to get tax benefit under RGESS?

    • Naimisha August 4, 201312:16 pm

      Hey Sidharth, you can use either of your demat accounts provided you are transacting in equities for the first time ๐Ÿ™‚

      • Sidharth August 4, 20138:12 pm

        Thanks Naimisha… Thanks for the reply. I haven’t invested in equities before. Hence, Eligible ๐Ÿ˜›

  • Ashvani August 14, 20139:33 am

    Hi Naimisha,

    I already have DMAT a/c from past 5 yrs so I cannot take benefit of RGESS, however as you have mentioned in your earlier post that I can claim benefit if I open a DMAT a/c on my wifeโ€™s name and have some RGESS on her name, is this correct? Please elaborate.

    Even if she is a salaried? (less than 2 lac annual) and hence doesn’t file returns.


    • Naimisha August 14, 20133:21 pm

      Your wife can claim deduction under RGESS if you open an account in her name and invest. However, since her total income is less than 2 lac, this is of no use.

  • senthil August 28, 20138:26 pm

    for each fy in order to claim the tax benefits do i need to invest seperate for each year


103 Responses to "Save 5k using Rajiv Gandhi Equity Savings Scheme (RGESS) – Sec 80CCG"