You may have encountered several deductions under Sections 80C, 80CCD, and 80D when organizing your tax-saving plan. Section 80CCG, sometimes called the Rajiv Gandhi Equity Savings Scheme (RGESS), was one such provision that once provided tax assistance to first-time stock traders. Many taxpayers still look for the definition, eligibility requirements, and list of investments covered by the program for academic purposes or for previous assessment years, even though this portion has been withdrawn. This article explains Section 80CCG, certified investments, deduction caps, and the rationale for the RGESS scheme's establishment.

What is Section 80CCG?

In order to inspire first-time retail traders to interact in the stock market, the Union budget 2012–13 covered a tax deduction known as section 80CCG. The objective was to encourage more equity participation nationally while providing a tax advantage that lowered the total value of investing. Best investments made under the Rajiv Gandhi Equity Savings Scheme (RGESS) had been eligible for this deduction. But, starting with the 2018–19 assessment year, the management abolished section 80CCG. Consequently, it isn't always possible to claim any new deductions these days. For the subsequent 3 years, only those who had previously used the advantage can continue to do so.

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Key features of Section 80CCG (RGESS)

Here are the major highlights of the now-discontinued 80CCG deduction:

Applicable only to first-time equity investors
Allowed a 50% deduction on the amount invested
Maximum investment eligible for deduction: ₹50,000
Maximum tax deduction possible: ₹25,000 per financial year
Mandatory 3-year lock-in period
Investment allowed only in listed equities, specified mutual funds, and ETFs
Allowed only to individual resident taxpayers with income criteria

Let’s explore these in detail:

Eligibility for Section 80CCG

To claim a deduction under Section 80CCG (as applicable for earlier assessment years), the following criteria had to be fulfilled:

Criteria

Description

Resident Individual

Only resident individuals were eligible to claim the deduction. Non-resident Indians (NRIs) were not eligible under Section 80CCG.

First-Time Investor

The taxpayer had to be a first-time equity investor. This meant either: • No demat account in previous financial years, or • A demat account existed but was never used for equity trading. This rule encouraged new investors to participate in equity markets.

Income Limit

The taxpayer’s gross total income had to be ₹12 lakh or less during the financial year in which the deduction was claimed.

Eligible Investment in RGESS

The deduction applied only to investments made in specified equities, ETFs, or mutual funds notified under the Rajiv Gandhi Equity Savings Scheme (RGESS).

Section 80CCG – List of eligible investments

The Rajiv Gandhi Equity Savings Scheme allowed investments in the following instruments:

1. Listed Equity Shares on BSE/NSE

Only equity shares from groups that were a part of the BSE-100 or CNX-100 (Nifty 100) indexes could be invested under section 80CCG. Those companies have been appropriate for first-time equity investors since they represented sizable, dependable, and well-established companies. Moreover, certain Public Sector Undertakings (PSUs) stocks were eligible under this system. The PSU is required to be categorized as a Maharatna, Navratna, or Miniratna enterprise so as to qualify. To ensure market management and transparency, these shares had to be listed on legitimate stock exchanges.

2. Equity Mutual Funds under RGESS

Investments in positive equity mutual funds that adhered to RGESS policies were accredited below Section 80CCG. In order to ensure compliance with government rules, these funds are basically invested in equities that are certified under the system. These mutual funds were created for traders who favored expert fund management over choosing stocks on their own. They simplified the technique of selecting individual shares and supplied expert portfolio diversification. For beginner buyers seeking managed publicity to the equity market, this made them the perfect starting point.

3. Exchange-Traded Funds (ETFs)

Exchange-Traded Funds (ETFs) that tracked significant indexes, like as the BSE-100, CNX-100, or PSU-focused indices that included Maharatna, Navratna, and Miniratna organizations, were eligible under RGESS. In a single investment, these ETFs offer different exposure to top-rate equities. They were low-cost for beginners due to their shape's low fee ratios. Because ETFs mimicked benchmark indexes, additionally, they additionally assured a high degree of transparency. They were suitable for buyers who preferred trustworthy, long-term, market-linked strategies as a passive investment.

4. Initial Public Offers (IPOs) of Eligible PSUs

If the issuing firm was classified as a Maharatna, Navratna, or Miniratna, some IPOs of Public Sector Undertakings were eligible for section 80CCG advantages. In order to preserve regulatory compliance, those IPOs additionally needed to be indexed following the advent of the RGESS standards. New retail investors were encouraged to participate in the authorities' disinvestment programs by allowing PSU IPOs under the program. Additionally, it provided access to well-established institutions supported by means of solid public sector ideas. This improved equity participation throughout India and boosted investor confidence.

Amount of deduction available under Section 80CCG

The deduction was structured in a simple and investor-friendly manner:

Particulars

Details

Maximum Investment Allowed

₹50,000

Deduction Allowed

50% of the amount invested

Maximum Deduction Under Section 80CCG

₹25,000 per financial year

Example:

Amount Invested in RGESS

Deduction Available under 80CCG

₹20,000

₹10,000

₹30,000

₹15,000

₹50,000

₹25,000 (maximum limit)

This deduction was over and above the popular Section 80C limit of ₹1.5 lakh.

Why was Section 80CCG withdrawn?

The deduction under Section 80CCG was discontinued from FY 2017–18 because:

It was found to be complex for new retail investors
The popularity of the scheme remained low
The government wanted to simplify the tax structure
The rise of SIPs and ELSS mutual funds made RGESS less relevant

Today, ELSS (Equity Linked Savings Scheme) under Section 80C is considered a better and simpler tax-saving equity option.

Current Status of Section 80CCG

As of right now, Section 80CCG prohibits new investments in the Rajiv Gandhi Equity Savings Scheme (RGESS). Taxpayers are not eligible to make new deductions under this provision as of the evaluation year 2018–19. blessings may want to only be claimed for the balance of the 3-year deduction term via individuals who had previously invested earlier than the cessation. This essentially means that RGESS will no longer be available to new traders as a tax-saving opportunity. Alternative merchandise, including ELSS mutual funds, PPF, NPS, and life insurance rules, offer reliable tax-saving alternatives for present-day taxpayers. Those choices are easier to use, more available, and nonetheless frequently utilized under different Income Tax Act provisions.

Conclusion

Through the Rajiv Gandhi Equity Savings Scheme (RGESS), section 80CCG has become an encouraging effort designed to increase equity participation amongst first-time traders. Even though the deduction had appealing features, inclusive of a lock-in structure and a 50% deduction on investments, the plan was finally deserted due to its complexity and low uptake. To increase wealth while lowering tax responsibilities, investors can now look at more trustworthy tax-saving choices like PPF, NPS Tier I, or ELSS mutual funds. previous to selecting the appropriate funding and tax-saving techniques, you must always check your financial goals and risk tolerance.

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