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.

Eligibility Criteria

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

Eligible Investments u/s Section 80CCG

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 Read More 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.  Read Less

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 inves Read Moretors to experiment with investing more safely and hence, learn by practice.  Read Less

Documentation and Paperwork Required for Section 80CCG

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

Changes Made to Section 80CCG

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.

Section 80CCG Alternatives

While Section 80CCG deductions can no longer be availed, you can still explore investment options that offer certain tax benefits. Here are a few alternative options you could consider: 

  • Equity Linked Savings Scheme (ELSS)

ELSS is a type of tax-saving mutual fund that locks your funds in for three years. It is eligible for deductions of up to ₹1.50 Lakhs under Section 80C.

  • National Pension Scheme (NPS)

NPS subscribers can get a deduction of up to ₹50,000 for investing in the NPS Tier I account under Section 80CCD (1B). Individuals can claim additional deductions under Section 80C as well. 

  • Unit Linked Insurance Plan (ULIP)

This is a type of life insurance that offers investment returns as well. From income that can be taxed, the premium amount is deductible under Section 80C. However, every payout is not taxable as per Section 10 (10D). After holding a ULIP for 5 years, partial withdrawals are tax-free.

 

Purchasing an annuity helps you get a 100% tax exemption on the amount you contributed, although each payout is liable to taxation. Upon meeting the senior citizen criteria, you are eligible to withdraw up to 40% of your fund value with no taxation levied on that withdrawal. 

 

Should you choose to reinvest the remaining 60% in purchasing an annuity, you are not liable to pay any tax. However, the payouts are subject to taxation.

Read More

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.

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