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Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS) Title By Legal & Compliance Dept .

Rajiv Gandhi

Equity Savings Scheme, 2012

(RGESS)

Title

By Legal & Compliance Dept.

THE PRODUCT – OBJECTIVE &FEATURES

THE PRODUCT – OBJECTIVE &FEATURES  Announced in Union Budget of 2012-13 and notified on 23

Announced in Union Budget of 2012-13 and notified on 23 Nov. 2012.

SEBI circular dated 6th December 2012.

To promote an ‘equity culture’ in India and encourage savings of small investors in domestic capital market.

ONE TIME 50% deduction under section 80CCG of Income Tax Act, 1961 for a maximum investment amount of Rs. 50,000/- (e.g. if amount invested is Rs. 50 K income tax benefit of Rs. 25 K can be claimed).

Deduction u/s 80CCG is over & above the Section 80C limit of Rs 100,000/-

Investment can be made in installments. However ,benefits can be availed only for the investments made in 1st F.Y in which benefit is claimed.

Only new retail Investors whose Gross Total Income is less than or equal to Rs 10 lakhs are eligible for deduction in the 1st A.Y. (i.e. income from all sources).

Non fulfillment of conditions will result in withdrawal of Tax benefit.

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WHO CAN INVEST ?  Only Individual (HUF, P’ship etc. not eligible).  Gross total

WHO CAN INVEST?

Only Individual (HUF, P’ship etc. not eligible).

Gross total Income < = Rs. 10 lakhs

Only New Retails Investors are permitted to claim deduction:

New Retail Investor means:

Individuals who do not have a demat account and who have not traded in derivatives segment as on November 23, 2012.

Individuals having demat account have not invested in equity &/derivative segment as on November 23, 2012

Individuals having demat acoount where he/she is not the first holder. PAN card is mandatory for account opening. Hence investors residing in the state of Sikkim are not eligible.

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LIST OF ELIGIBLE SECURITIES

1. Equity Shares falling in the list of equity declared as “BSE-100” or “CNX- 100” by BSE & NSE.

2. Maharatnas, Navratna & Miniratna as categaorised by Central Government.

3. Follow on Public Officer (FPO) of (1) & (2) above

4. New Fund offers (NFOs) of (3) above

5. IPOs of PSU whose turnover is > Rs.4000cr during preceding three years

6. Mutual Funds invested in (1) to (5).

7. Exchange Traded Funds (ETFs) invested in (1) to (5)

Note : list of securities will be available on Exchange website and with depositories. The link for RGESS eligible securities are given below:

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LOCK IN PERIOD

LOCK IN PERIOD The scheme is subject to lock in period of 3 years divided in

The scheme is subject to lock in period of 3 years divided in fixed and flexible lock in:

Fixed Lock in period

 

Flexible Lock in period

Commences from the date of purchase of eligible securities in the relevant F.Y. and ends one year

Investor permitted to trade during flexible lock in period provided the Demat account is compliant with the following during two hundred and seventy days during each of the remaining two years:

Portfolio value is equal to or higher than the amount claimed as deduction Trading permissible only in eligible securities

from the date of purchase of last set of eligible securities in the same F.Y for which deduction is claimed. It is to be noted that if the investment is made in installments the lock-in would be more than one year. For Eg if the first investment is made on

01.04.2013

and the last investment (i.e when the

 

account hits Rs 50,000 mark) is made on

28.02.2014

then the lock-in period would end one

year after 28.02.2014 i.e on 27.02.2015.

Not

permitted

to

sell,

pledge

or

hypothecate

securities

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EXAMPLE

EXAMPLE L & C

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DOCUMENTATION  Investor to open a Trading & Demat account.  Submit declaration in Form

DOCUMENTATION

Investor to open a Trading & Demat account.

Submit declaration in Form A as per the format prescribed in SEBI Circular dated 6th Dec.2012 wherein investor provides undertaking about his eligibility for the scheme and claims to have read and understood the Terms & Conditions of RGESS.

In case the investor wishes to exclude certain securities within the above limit of investment, he can do so by specifying such securities in Form B as per the format prescribed in SEBI Circular dated 6th Dec. 2012 in the circular. This form is to be submitted within one month from the date of credit of securities to the DP.

In case of change in investment amount in view of involuntary corporate actions like merger, demerger , etc, the deduction claimed shall not be affected.

Change in investment amount in view of voluntary corporate actions like buyback where investor has an option to exercise choice, the same shall be considered as sale transaction.

Demat account to be converted to ordinary demat account on completion of period of holding.

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PROCESS CHANGES REQUIRED AT ANGEL

PROCESS CHANGES REQUIRED AT ANGEL  Product needs to be internalise & marketed.  A new

Product needs to be internalise & marketed.

A new tag is required to be created in the back office system (Trading as well as DP) for RGESS monitoring.

KYC, Feedback, Operation and Sales team needs to be educated about the Product in order to enable them to explain the same to clients.

Beside declaration from Client we need to do PAN verification at the time of UCC upload and KRA Verification.

We need to extend BSDA facility to the investors under RGESS.

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Challenges  Limited choice of stocks  Maintenance of the initial value of the investment

Challenges

Limited choice of stocks

Maintenance of the initial value of the investment for at least 270 days in year two and year three.

Only one time exemption allowed and that too only 50% of the Investment made.

The structure of lock in period is very complex and hence difficult for common investor to understand and invest for a meager deduction of Rs.

25,000/-

Since investment made in installments, keeping track of different lock-in dates is very cumbersome.

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L & C For any clarification please write to compliance@angelbroking.com Thank You

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For any clarification please write to

Thank You