Section 80CCG – Phasing Out of RGESS

Note : Deduction under section 80CCG has been discontinued starting from 1st April 2017.

The Rajiv Gandhi Equity Savings Scheme was introduced in Budget 2012. This deduction was over and above the 80C deduction available to individuals.

Key Aspects of this Scheme

• This deduction was available to resident individuals only
• The investments must be made in listed equity shares or equity-oriented mutual funds
• The deduction allowed under RGESS was 50% of the total amount invested
• The deduction claimed for an FY could not exceed Rs. 25,000, so to avail of the maximum deduction, one needed to invest Rs.50,000.
• Deduction was available only for 3 consecutive years, starting from the year in which the first deduction is claimed.

For example, if the first deduction is claimed in FY 2013-14 by investing enlisted equity shares, then the deduction can be claimed for 3 consecutive years, i.e., FY 13-14, 14-15 and 15-16, provided the investment is made in each of those years.

• There is a lock-in period of 3 years for the investments made
• The income of the assessee in the year of claiming deduction must not exceed Rs 12 Lakh
• The investor must be a new retail investor

Starting from 1st April 2017 the scheme was phased out. This is because a very limited number of assessees avail this deduction. Due to this phasing out, a new investor in Financial Year 2017-18 would not have been eligible to claim the deduction under section 80CCG. However, any individual who has claimed the deduction in Financial Year 2016-17 and earlier years would have been allowed a deduction in Financial Year 2017-18 if he was eligible for the same.