How to invest in the Rajiv Gandhi Equity Saving Scheme The government gave you a discount on your taxes just for trying out the stock market for the first time in one scheme, and this scheme is called the Rajiv Gandhi Equity Savings Scheme, or RGESS for short. It was launched as a way to help beginners start their investing journey without feeling too scared, making the world of shares and stocks a lot more welcoming for everyday people. This article is a guide to the Rajiv Gandhi Equity scheme on how to invest in this scheme, including the meaning, eligibility, benefits, procedure of this scheme, availability and differences between different investment schemes like this. Rajiv Gandhi Equity Savings Scheme or RGESS is a government tax saving plan made specially for people who are new to the stock market, introduced in the Union Budget 2012–13 to help beginners start investing without fear. The idea was simple: teach people to invest and reward them with tax savings. Under Section 80CCG, investors could reduce 50% of the invested amount from their taxable income, up to a maximum investment of ₹50,000 in a year. This benefit could be taken for three years in a row.
Who could invest in RGESS? A resident of India.
A first-time investor, meaning you had never bought or sold shares or derivatives before.
Yearly income should be ₹10 lakh or less at first. Later, this limit was increased to ₹12 lakh.
Only individuals were allowed. HUFs, companies, and trusts were not allowed to invest.
You should not be the main holder of any joint demat account.
Investments were allowed only in approved and reliable options, including BSE-100 or CNX-100 companies, their FPOs , IPOs of government-owned PSUs with 51% or more government holding, RGESS-specific Mutual Funds or ETFs, and Maharatna, Navratna, or Miniratna PSUs along with their FPOs.
Also, read mutual fund tax rules
Benefits of this scheme RGESS helped new investors save tax on their investments.
You could invest up to ₹50,000 and get a tax deduction on half of that amount
You could use this benefit for three years in a row.
You did not need to invest all the money at once—you could invest little by little during the year.
You can understand the stock market and make investing less scary for beginners.
You are encouraged to move money from fixed deposits to investments that help the economy grow.
You get more tax benefits, which is very helpful for middle-class people.
You get this tax saving as extra and did not affect the ₹1.5 lakh benefit under Section 80C.
Step-by-Step RGESS Investment Procedure You need a Demat account to invest in RGESS.
Submit Form A to open or convert your Dema t account into an RGESS account.
The bank checks your PAN and eligibility.
You can invest up to ₹50,000 in RGESS-approved shares in a year.
These shares are locked for one year and cannot be sold or pledged during this time.
After one year, shares can be traded by following RGESS rules.
If you don’t want certain shares to be locked, submit Form B within 30 days.
Note: Only RGESS-approved shares get tax benefits; others do not. If the rules are broken, the tax benefit will be cancelled.
Availability of the scheme It is no longer available for new investors. The government started closing this scheme from 1 April 2017 because very few people were using it and the rules were confusing. In the year 2017, it was decided to fully stop the scheme by 2018. People who had already invested earlier can still enjoy the tax benefit until their lock-in period ends, but new investors cannot join RGESS anymore. Even though the scheme tried to encourage people to invest in the stock market and learn about equity, low awareness and complex conditions led to its closure.
Difference between Investment Schemes There are investment schemes that help save money and reduce tax, so below are listed some with their common differences ;
Point ELSS(Equity Linked Saving Scheme RGESS Public Provident Fund National pension scheme Type of investment Mutual funds Listed equities, mutual funds & ETFs Government savings scheme Retirement savings scheme Maximum Tax deduction allowed 100% deduction, i.e., ₹1,00,000 50% deduction, i.e., ₹25,000 ₹1,50,000 ₹1,50,000 Lock-in period 3 years 3 years (trading allowed after 1 year with conditions) 15 years Till retirement Who can invest Any investor Only new retail investors Any individual Indian citizens (18–60 years) Current status Active Discontinued Active Active
Suggested read on Section 80 C of Income Tax
Conclusion Even though the Rajiv Gandhi Equity Savings Scheme was a good idea to help people learn to invest in the stock market, the government decided to stop it for new investors in 2017 because the rules were a bit too confusing. Today, people mostly use other plans like ELSS to save on taxes. This scheme reminds us that while the stock market can be a bit like a roller coaster, starting early and learning the rules is the best way to grow your piggy bank!
Also read Maximising returns with the government Investment Scheme
FAQs How much money can I invest in the RGESS scheme? If you are a new investor, you can put upto ₹50,000 into this scheme and get a discount on your taxes
Can I lose my tax benefits under this scheme? You might lose that reward if you take your money out too early or if your account balance drops below the amount you promised to save
What are the risks of this scheme? As money goes into the stock market, there is always a chance you could lose some of it. Even though the plan aims at being cautious by diversifying your investments into various firms, the plan never guarantees that you will make money
How long is a lock-in period? Your own money must remain in the plan for a total of 3 years, although conditions will shift depending on the passage of time. During the first year, your money is frozen, and you aren't allowed to sell anything. In the next two years, the rules relax a little bit, and you can sell your investments as long as you follow certain steps.
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