Section 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.
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
1. Was ELSS a part of 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.
2. How to claim an 80CCG deduction?
When the government offered an 80CCG deduction, i.e., before April 1 2017, people could avail of this tax benefit when filing their ITR. However, after its discontinuity, individuals can no longer claim this deduction.
3. When was the discontinuity of Section 80CCG deduction announced?
The discontinuity of Section 80CCG of the Income Tax Act was informed during Union Budget 2017. After that, the deduction under this Section was no more applicable. So now, investors cannot claim a deduction on their first-time equity investment.
4. Does deduction under Section 80CCG come under 80C?
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.
5. What is a Demat account?
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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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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