The Centre has approved a new tax saving scheme called the ‘Rajiv Gandhi Equity Savings Scheme (RGESS) with a view to provide tax benefits. The Finance Minsitry in its statement has said that the scheme is exclusively for first time retail investors in the securites market with annual income of below 10 lakh rupees in a financial year. The maximum investment permissible under the scheme is 50 thousand rupees and the investor would get a 50 per cent deduction of the amount invested from the taxable income for that year.

The scheme will not only encourage the flow of savings and improves the depth of domestic capital markets, but also aims to promote an equity culture in the country. To benefit the small investors, the investments are allowed to be made in installments in the year in which tax claims are made. The total lock-in period for investments under the Scheme would be three years including an initial blanket lock-in period of one year, commencing from the date of last purchase of securities under RGESS.

The new retail investors will be identified on the basis of their PAN numbers and the first-time investors who have opened their demat accounts but have not made any transaction till the date of notification of this Scheme, will also be eligible. The Ministry said that Department of Revenue will notify the Scheme and SEBI will issue the relevant circulars to operationalize the Scheme in the next two weeks.