Rajiv Gandhi Equity Saving Scheme, 2012

Author:Mr Aishwarya Mohan Gahrana
Profession:Aishwarya M Gahrana & Associates

A new Section 80CCG has been inserted into Indian Income Tax Act by the Finance Act 2012 with effect from 1st day of April 2012. This means this action is applicable for previous year 2012 – 13 and assessment year 2013 – 14. This Section 80CCG of Indian Income Tax Act, 1961 allow a deduction of fifty percent of amount invested in equity shares up to amount of Rs.  50,000.oo (Rs. Fifty thousand only) in a previous year as par a scheme called Rajiv Gandhi Equity Saving Scheme, 2012. Even though this law and scheme is targeted to attract small investors to capital market, political analyst think timing of this scheme aiming for next general election scheduled to be held in year 2014. Interestingly, this scheme provides once in lifetime deduction (Sub – section 2 of Section 80CCG). It may attract small investors to capital market and keep them there for 3 years as per lock – in period condition. In simple words, this scheme, give incentive to small investors to taste water in capital market; unless he got addiction, he may come out of capital market. Hence, it, perhaps, may not create informed and serious small investors for Indian capital market. Please note, in a saving oriented country like India a big portion of earning population is out of banking and other financial cover. As per this Section, to get benefit of this deduction, following conditions must be satisfied: The benefit of this scheme is available to resident individual only and he must satisfy condition of "new retail investor" as per the scheme. A person can claim this benefit only once i.e. first time only. Gross total income of claimant shall not exceed ten lakh rupees (Rs. 10,00,000.oo) The claimant must be a new retail investor as per definition given in the scheme. The investment is made in listed equity shares as specified in the scheme. The investment is locked – in for a period of three years. In case of any failure to comply any condition laid down in this section and the scheme, may result in increased tax liability in a subsequent assessment year. Now, we discuss the scheme, called Rajiv Gandhi Equity Saving Scheme, 2012 notified by the Government  by Notification 51 dated  23rd November 2012 under this Section 80CCG. The scheme adds some conditions and details its procedure. The claimant under this scheme must satisfy following conditions to be classified as "new retail investor": An individual who has not opened a demat account and has not made any transaction in...

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