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Rajiv Gandhi Equity Savings Scheme–Securities Considered Eligible

It is a deliberate act of the Finance Ministry to leave the things vague in the budget so that they can issue their interpretations at their leisure which suits them. This is the story behind Rajiv Gandhi Equity Savings Schemes (RGESS) which was announced in Budget in Feb 2012

Imp features of RGESS are as listed below:

  • 50% tax rebate to new retail investors who invest up to Rs 50,000 directly in equities and whose annual income is below Rs 10 lakh.
  • Investments allowed in follow-on offers of companies in this grouping (BSE 100, CNX 100 and blue chip public sector stocks) and initial public offers of PSUs that have Rs 4,000 crore of turnover
  • Lock-in for three years, but investors may be allowed to churn their portfolio in after completion of one year

However this scheme was left vague as it was not specified that which securities fall int the ambit of Rajiv Gandhi Equity Savings Schemes. Now it has been cleared by virtue of a circular by SEBI and following listed securities have been allowed:

  • Close-ended mutual funds (which are traded and listed on stock exchanges)
  • Exchange Traded Funds (ETFs) (barring gold ETFs)
  • Equity shares of:   BSE-100, CNX-100
  • Maharatna, Navaratna and Miniratna Public Sector Undertakings (PSUs) - including their Follow-on Public Offers (FPOs)
  • IPOs of PSUs with Government stake not less than 51%, having revenue of Rs 4,000 crore in the last three years
  • Moreover, in case of shares as investors in RGESS, you have an option to exercise your choice in case of two corporate actions - i.e. rights issue and buy-back of shares.

So finally if you have been looking to save taxes the clarifications have been given and you can straightaway go ahead and use it optimally to save the taxes.

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