Section 80CCG of the Income Tax Act, 1961 was introduced in the Union Budget of 2012-13. Also known as the Rajiv Gandhi Equity Savings Scheme, Section 80CCG focuses on uplifting the domestic capital of the country. It also helps investors save money through deductions in taxation.
The deductions offered through this scheme are applicable to an investor’s first equity investment only. Section 80CCG’s focus on the initial investment aims to incentivise new entrants, thereby contributing to the development of the country's financial ecosystem.
Section 80CCG is reserved for individual taxpayers and investors only. Other entities such as societies, companies, and trusts cannot benefit from the provisions stated under this section.
These individuals must adhere to the below eligibility and document criteria:
Annual income must be below ₹12 Lakhs
Investments must be made under listed equity funds only
Valid Demat account
Investment must have a 3-year lock-in period
Indian citizenship
Certain equity options need to qualify as investable under Section 80CCG of the Income Tax Act of 1961. The investments are stated under the following categories:
1. Maharatna Investments
These are entities such as companies or institutions, which can invest up to ₹5,000 Crores or 15% of their net worth in a specific project.
2. Navratna Investments
Navratna companies are those that can invest up to ₹1,000 Crores in a particular project.
3. Miniratna Investments
Miniratna companies invest ₹500 Crores or their total net worth, depending on which is lesser, in a project.
4. ETFs and Mutual Funds
Mutual funds and Exchange Traded Funds (ETFs) which are compliant with Section 80CCG regulations are eligible.
Features and Benefits of Section 80CCG
Here are the various features and benefits you can avail under Section 80CCG:
Tax Deduction
You can get up to 50% tax deduction benefits on a maximum investment of ₹50,000 to the equity market. In this case, you can get a tax benefit of up to ₹25,000 in a single assessment year.
3-year Tax Benefits
Investors can enjoy tax benefits for three years upon parking their funds in the Indian equity market. The 50% tax benefit is also eligible to last for three consecutive years, helping you save a total amount of ₹75,000 during this period. Subsequently, any withdrawals made within those three years from the investment will nullify your tax benefit privileges with immediate effect.
Savings and Stability
Section 80CCG offers individuals a cushioned beginning, allowing them to start their saving and investing journey in a more stable and less risk-prone market. It also poses an opportunity for new investors to experiment with investing more safely and hence, learn by practice.Section 80CCG of the Income Tax Act requires only a set of basic documents for qualified investors. They are as follows:
Demat account documents
PAN card
Form B
Introduced in FY 2012-13, Section 80CCG initially had an income limit of ₹10 Lakhs and the deduction duration was one consecutive financial year. However, the government later made changes to increase the limit and duration to ₹12 Lakhs and three consecutive fiscal years, respectively.
This deduction was available for taxpayers over and above those listed under Section 80C. However, FY 2017-18 saw the end of the Rajiv Gandhi Equity Savings Scheme. The batch of investors in this financial year was the last to enjoy Section 80CCG’s benefits and provisions. The scheme was shut down due to a lack of adequate number of assessees.
FAQs
Is ETF an eligible investment as per Section 80CCG?
Yes. Exchange Traded Funds, or ETFs, are an eligible investment option under Section 80CCG of the Income Tax Act, 1961.
Is Section 80CCG applicable to non-resident Indians?
No, the provisions under Section 80CCG are not applicable to NRIs.
Is Section 80CCG still applicable?
No. Section 80CCG was discontinued in FY 2017-18 due to a lack of assessees applying for this scheme.
Do Mutual Funds come under Section 80CCG?
Only certain types of mutual funds can be considered under Section 80CCG. Usually, they are equity related mutual funds.
When did Section 80CCG get discontinued?
Section 80CCG/Rajiv Gandhi Equity Savings Scheme was discontinued in the financial year of 2017-18.
Who is eligible for Section 80CCG?
Eligibility for Section 80CCG requires a gross total income not exceeding ₹12 lakh, being a new retail investor, investing in specified listed equity shares or units, and maintaining a three-year lock-in period.
What is the lock period for 80CCG?
The lock-in period for investments under Section 80CCG is three years. This includes a fixed lock-in period for the first year and a flexible lock-in period for the next two years.
What is Rajiv Gandhi's equity saving scheme 80CCG?
The Rajiv Gandhi Equity Savings Scheme (Section 80CCG) offers a 50% tax deduction on investments up to ₹50,000 in specified securities. It’s designed for new investors with an income up to ₹12 lakh and includes a 3-year lock-in period.
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