Section 80CCG: Rajiv Gandhi Equity Savings Scheme (RGESS) Deduction Amount & Eligibility
Taxation On Dividend Income Of Different Mutual Fund Investments
7 April 2022
Difference Between Financial Year And Assessment Year
7 April 2022Section 80CCG of the Income Tax Act, also known as the Rajeev Gandhi Equity Savings Scheme (RGESS) was introduced in Union Budget 2012 to instill a sense of savings among individual investors and boost the country’s domestic capital market. It offered incentives to those who invested in equity shares.
This post tells you how Section 80CCG benefited eligible investors and other details. Read on!
What is Section 80CCG?
Section 80CCG of the Income Tax Act, 1961, the Government of India provided incentives to taxpayers who carried investment in the stock market. As it allowed deduction at the time of tax calculation, it motivated investors to invest their savings in equity. This mainly included those who were making equity investments for the first time.
Deduction and Limit Applicable under Section 80CCG
The following are the details of the deduction amount under Section 80CCG:
- When an investor invested in the equity share market for the first time, they were eligible for a deduction of up to 50%.
- Tax deduction was available on an investment amount of not more than Rs. 50,000.
- As there was a limit on the maximum investment amount and the deduction rate, the tax deduction available could not exceed Rs. 25,000.
Let’s take an example:
Suppose Mr. Jha was a first-time investor who invested Rs. 30,000 in equity shares in FY 2016-17. He was eligible for a deduction under Section 80CCG of the Income Tax Act on his total investment amount as it did not exceed the limit of Rs. 50,000. The rate was 50%. So, the deduction amount available to Mr. Jha was Rs. 15,000.
Eligibility Criteria for Claiming Deduction Under Section 80CCG
Here’s a list of eligibility criteria for claiming tax deduction under Section 80CCG:
- Applicable for individuals only.
- Total revenue of the taxpayer should not have exceeded the limit of Rs. 12 lakh for claiming deduction in the particular FY.
- Individuals had to be first-time equity investors for claiming deduction under Section 80CCG.
- There was a lock-in period of 3 years for the equity investments made by investors.
- Individuals needed to have a Demat account for claiming the deduction.
- Individuals must have invested in equity-oriented funds/schemes or listed shares.
- 80CCG deduction was only available for specific investment categories.
Also Read: How To File Income Tax Return For Mutual Funds On The New Tax Portal?
What Are the Different Investments Eligible for 80CCG deduction?
If an individual made their investment in the following options, then only deduction under Section of the Income Tax Act 1961 was available:
- Equity-oriented mutual fund schemes
- ETF units
- Securities of BSE-100/CNX 100
- Shares of Maharatna, Navratna, or Miniratna
Was Section 80CCG Discontinued?
Yes, it was discontinued after April 1, 2017. The reason being not many investors were availing this scheme.
Also Read: Section 24 Of The Income Tax Act
Final Word
Section 80CCG of the Income Tax Act was a scheme that investors could avail themselves before FY 2017-18. It was started by the Government of India to motivate investors to invest in the equity market. However, due to a lack of investors, section 80CCG was discontinued in the year 2017. If you are ready to invest, visit Navi Mutual Fund and get started today!
*Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
FAQs on Section 80CCG
No, ELSS was not a part of 80CCG. It is a tax saving investment covered under Section 80C of the Income Tax Act. Through this scheme, investors get a deduction of up to Rs. 1,50,000 in a financial year.
When the government offered 80CCG deduction, i.e., before April 1 2017, people could avail this tax benefit when filing their ITR. However, after its discontinuity, individuals can no longer claim this deduction.
The discontinuity of Section 80CCG of the Income Tax Act was informed during Union Budget 2017. After that, deduction under this Section was no more applicable. So now, investors cannot claim a deduction on their first-time equity investment.
Previously, the Indian government provided Section 80CCG deduction to the investors over and above the tax benefits of 80C. But now, since it was discontinued in Budget 2017, it no longer is available under Section 80C.
A Demat account helps investors to hold all their financial securities in digital or electronic form. Thus, it makes the handling process of mutual fund units, ETF units, shares, bonds, government securities, etc., extremely convenient.
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