Section 80CCG of Income Tax Act

Investing in equity shares is always beneficial for individuals who wish to earn wealth over a period. To keep this demand intact, the Central Government launched the Rajiv Gandhi equity saving scheme.

This scheme offers inducements to individuals who invest in the equity market. In addition, it helps investors save significantly on taxes and contribute to India’s domestic capital market.

Keep reading to learn more about this scheme and its exemptions.

What Is Section 80CCG of the Income Tax Act?

Section 80CCG helps equity market investors by offering tax exemptions on investments. Individuals who invest their funds in the equity market with a 3-year lock-in period are eligible for this scheme.

Introduced in the Finance Act of 2012, the Rajiv Gandhi Equity Saving Scheme aimed to boost investments in the securities market. It encourages both existing and new investors to try financing in the equity market.

Through this scheme, the Central Government targets growth in socio-economic practises in Indians. For instance, the method of saving, expanding the investors base, boosting the capital market beyond the fixed investors, promoting equity trading among youth, etc.

However, to gain the benefits of investment under 80CCG, individuals have to fulfil the eligibility parameters.

Who Is Eligible to Claim Deductions Under Section 80CCG?

There are specific criteria set by the Central Government that need to be fulfilled by applicants to claim benefits under 80CCG.

The benefits under Section 80CCG are applicable for first-time investors.
An investor should have a minimum income of ₹12 lakh yearly.
Only specified types of investments can qualify for the benefits.
Investments made should be listed in equity shares under equity-based funds.
Stocks should be registered underneath the BSE 100 or CNX 100. Even public undertakings qualify under this scheme.
Mutual funds and ETF investors can apply for this scheme.
An individual should have a Demat account.
This scheme allows a maximum investment of ₹50,000. There is a 50% deduction.
The lock-in period of these investments should be at least three years.

Eligible candidates should check the available deduction under Section 80CCG. This will help individuals understand the concept better.

First-time equity market investors can claim tax exemptions under Section 80CCG. Ideally, individuals with a Demat account who haven’t invested in derivative transactions can gain 50% deductions on their investment.

To increase the benefit scale under the 80CCG investment scheme, individuals should know the eligible investments.

What Are the Eligible Investments to Claim Deductions Under 80CCG?

Individuals can claim deductions for the following investments under Section 80CCG.

Purchasing shares of Maharatna, Navaratna or Miniratna
ETF units
CNX 100 units
BSF 100 units
Mutual fund schemes (equity-based).

Apart from checking investments applicable for deduction under 80CCG, individuals should study how to claim the benefits.

How to Claim Deduction Under 80CCG of Income Tax Act?

Individuals have to open a Demat account to start investing in the equity shares. Then, they can follow the mentioned steps to claim deductions under the RGESS scheme.

Step 1: Open a Demat account.
Step 2: Designate this account under RGESS by submitting a declaration in Form A to a DP.
Step 3: They can now start investing.

Individuals should know that the securities bought via Demat account get locked in during the first year. However, investors aren’t allowed to sell these shares during the lock-in period.

After the completion of the lock-in period, individuals can start trading these securities.

How to Calculate Deductions Under Section 80CCG of the Income Tax Act?

Individuals should know that the 80CCG deduction limit is up to ₹50,000. Therefore, anything above the mentioned amount isn’t taxable.

For example, an individual invests ₹50,000 in an equity scheme. Being a first-time investor, he/she is eligible to claim tax exemptions up to 50% which comes to ₹25,000.

Now the applicable taxation under Section 80CCG reduces the taxable amount by ₹25,000.

This is the relevant information on the Rajiv Gandhi equity saving scheme and the applicable deductions.

However, individuals should know that the scheme has been phased out since April 2017. The investments made in 2017-2018 are eligible for this scheme benefits.

Frequently Asked Questions

✓ Is the RGESS scheme applicable for NRIs?

No, the Rajiv Gandhi equity saving scheme is applicable for Indian residents who invest in the equity market.

✓ Is ETF a part of Section 80CCG or Rajiv Gandhi equity saving scheme?

Yes, ETF investors can claim deductions under the Section 80CCG scheme.