Rajiv Gandhi Equity Saving Scheme

The Rajiv Gandhi Equity Saving Scheme was a mutual fund with a tax benefit established by the Indian government to stimulate the circulation of average retail investors’ savings in a capital market in India. It was established in the 2012-2013 Union Budget and was renewed from 2013 to 2014. But, due to a lower number of taxpayers, the 2017 Union Budget suggested that Rajiv Gandhi Equity Saving Scheme be discontinued by 2018 w.e.f  1st April 2017. Rajiv Gandhi Equity Savings Scheme was a scheme aimed to save tax in addition to a scheme of equity aimed at average investors possessing annual gross incomes less than a specific level. Its mission was to foster the “equity culture” in the country by increasing investor participation in the securities market in India, as well as to advance financial inclusion and security objectives. It was created for retail investors who are new and first-time with little or no expertise in the security markets. 

Those who have already invested can receive tax breaks, but no new investors can participate in Rajiv Gandhi Equity Saving Scheme or RGESS.

Read Tax Saving Schemes.

Rajiv Gandhi Equity Savings Scheme Is?

Rajiv Gandhi Equity Savings Scheme was a scheme aimed to save tax in addition to a scheme of equity aimed at average investors possessing annual gross incomes less than a specific level. Its mission was to foster the “equity culture” in the country by increasing investor participation in the securities market in India, as well as to advance financial inclusion and security objectives. It was created for retail investors who are new and first-time with little or no expertise in the security markets. 

But who qualifies as new or first-time investors? A fresh retail investor is an individual who places their first of any sort investment in a Rajiv Gandhi Equity Savings Scheme a/c on the initial day of the initial or inaugural year. The initial year is the fiscal year in which securities are invested in the RGESS account. It may or may not be the same fiscal year in which the Demat account is opened under the Rajiv Gandhi Equity Saving Scheme. 1st-time investors are people who meet the following criteria:

• As someone who does not possess a Dematerialised account
• As someone who has opened an account with RGESS but has not done a transaction or traded in any derivative portion of the market or equities.

If interested, also read the Gold saving scheme.

Who was eligible to invest in the Rajiv Gandhi Equity Saving Scheme?

• A person who legally resides and works in India with an annual income of up to Rs.12 lacs was able to open such an account and invest while benefiting from tax breaks. The income threshold was increased to Rs. 12 lacs per year in 2013-2014 from Rs. 10 lacs per year in 2012-2013.
• The individual enrolling under the Rajiv Gandhi Equity Saving Scheme and making use of its perks must not have a past of dealing in shares.
• An individual could only have such an account. Rajiv Gandhi Equity Saving Scheme did not allow HUFs or Hindu Undivided Families, trusts, or business organizations to register.

The Lock-out Term of the Rajiv Gandhi Equity Saving Scheme

The term of lock-out was three years, with the 1st year being a ‘Fixed Lock-in’ and the following two years being a ‘Flexible Lock-out’ that began immediately after the ‘Fixed Lock-out’ of one year. The allocated Rajiv Gandhi Equity Saving Scheme

account was instantly transformed into a regular Demat account at the end of the ‘Flexible Lock-out’ period. The qualifying securities could not be sold during the first year of the ‘Fixed Lock-out,’ but they might be sold subject to specified circumstances beginning in the second year.

Returns and Perks of the Rajiv Gandhi Equity Saving Scheme?

A new retail investor might invest a maximum of Rs. 50k in qualified assets and receive a 50 percent deduction of a maximum of Rs. 25k in one fiscal year for up to three years in a row. Investors can make use of the tax benefits provided by the fresh section 80CCG of the IT Act through the Rajiv Gandhi Equity Saving Scheme. There is no required minimum investment. Tax advantages are available for 3 years. If a person pulls back the invested amount or does not meet the qualifying conditions, he may forfeit the tax advantages.

Furthermore, the invested amount in securities under Rajiv Gandhi Equity Saving Scheme were stocks listed on the CNX 100 or BSE 100, stocks of government-classified PSUs classified as Miniratna, Navratna, or Maharatna as well as select IPOs, ETFs, and Mutual Funds. It reduces dangers. The Finance Ministry protected the welfare of new investors by limiting investments to big-cap stocks, imposing a lock-out period plus adequate flexibility to capitalize on positive market moves, and so on.

Did Rajiv Gandhi Equity Saving Scheme have any threats?

The market’s risk is inherent in every stock plan. While diversifying and minimization of risk might be advantageous, the program did not offer guaranteed profits in financial markets. Participants in the Rajiv Gandhi Equity Saving Scheme faced the possibility of losing their investments in the equities market.

Furthermore, several experts indicated that investing in Equity Linked Savings Scheme rather than Rajiv Gandhi Equity Saving Scheme is extra profitable.

Equity Linked Savings Scheme Vs Rajiv Gandhi Equity Saving Scheme: The distinction?

Unlike Equity Linked Savings Scheme, which only concerns mutual funds investments, Rajiv Gandhi Equity Saving Scheme invests in mutual fund units as well as listed shares or Exchange Traded Funds. Equity Linked Savings Scheme has an edge over Rajiv Gandhi Equity Saving Scheme since it allows for a 100 percent deduction. Anyone who has previously invested in similar or unrelated schemes can enjoy tax breaks in an Equity Linked Savings Scheme. All fresh retail investors having zero trading experience might take advantage of the perks while in Rajiv Gandhi Equity Saving Scheme. Furthermore, Equity Linked Savings Scheme investors may profit from tax breaks every year, as opposed to only three years for Rajiv Gandhi Equity Saving Scheme, and the first is less hazardous.

Is Rajiv Gandhi Equity Saving Scheme Still Operational?

The plan was rolled down beginning 1 April 2017. Individuals who have previously invested and earned deductions will continue to profit, but new investors will not be able to participate in Rajiv Gandhi Equity Saving Scheme. Besides tax-free income, it enabled education and broaden the retail investing segment, and created financial inclusion; nonetheless, the complications outweighed the advantages. The effectiveness of this might lead to a shift away from conventional savings products like Bank deposits and toward capital markets, resulting in diversification for ordinary investors. But, due to low acceptance, it has been discontinued away.

Conclusion?

Sure, the equities market is one of the most popular places for investors to park their money and generate returns. 

But, did you know that it is the most volatile market? That means the risk of losing your money is high. Now, if you are a smart investor, you would want to at least invest in something more stable right? And guess what better investment vehicle than real estate investment? Particularly, India’s commercial real estate is booming. Affordably invest in premium Indian commercial real estate via Assetmonk, an Indian investing platform.