Rajiv Gandhi Equity Savings Scheme has easily become the most popular scheme in the last quarter of any financial year in India. While many considers that the savings under RGESS are too less to give it a try, there are many who are eagerly trying to get a grip of the complex possibilities that the government have weaved into the scheme.
It is true that the RGESS scheme is a hard nut to crack for the new retail investors who do not have the basic ideas about securities and demat accounts. But if you try to understand the basics, this scheme will prove to be your stepping stone into the wide market of share market trading.
Here in this article, I will try to showcase the benefits every new retail investors will get with Rajiv Gandhi Equity Savings Scheme.
1.Tax saving beyond the 1 lakh portion
Everyone paying tax will be familiar with the concept of 1 lakh tax saving benefits which you can avail every year. Everyone tries their best to complete the 1 lakh quota and get the maximum possible benefits.
But the most important advantage of this scheme is that the RGESS scheme comes under Section 80CCG and not under Section 80 C (The 1 lakh quota).
Hence you definitely get to avail an additional tax benefit irrespective of your 1 lakh quota.
2.Dividend is tax free
You are investing your money in securities of Navaratna and Maharatna companies and hence you will be eligible for the dividends of those companies. The best portion is that the dividends you earn will be absolutely tax free.
3.Reduced Annual Maintenance Charges
For opening a demat account with any depositary participants (DP’s) and holding the securities under it, you will be charged by the DP’s an annual maintenance charge. This charge varies and depends upon the DP you have chosen.
But the good thing is, if you are using your demat account only for holding the RGESS stocks, then you will only be charged Rs.100/- by the DP per year. You will not have to pay any sort of unnecessary charges for holding the RGESS stocks apart from this Rs.100/- AMC charge.
4.Flexibility to Invest in Installments
If you can’t afford to invest the entire sum of money together, you can invest the money in installments of 2/3/4 times within the financial year. The total amount of money invested in the financial year will be counted together for the tax benefit.
This is particularly assuring for small time investors who look forward to saving a small portion of money every month.
5.Can Avail the Gains from the securities after one year.
Even though the scheme has a lock in period of 3 years (1 year fixed lock in period and 2 years flexible lock in period), you are free to avail the gains from your securities after the first year of investment. You can also sell, pledge and trade in the securities after the first year keeping in mind the conditions after the first year.
Hence your money in RGESS is not fully blocked for 3 years, you can avail the returns from the securities apart from the dividends that you may receive.
Apart from the advantages mentioned above, investing in the securities definitely helps to diversify your savings portfolio and soon you will get accustomed to the demat accounts. RGESS provides the unique opportunity for all those who have not yet forayed into the stock market plus providing the tax reductions.
As like any other securities, investments in RGESS are also risky and are subject to market risks. It wouldn’t hurt either in trying to understand the scheme better or avail the help of any experienced market expert.
But definitely RGESS is not a scheme that can be rejected outright. Give it a try…
If you need any clarifications regarding this scheme, please feel free to comment here…