Section 80CCG - Deduction under Section 80CCG

Taxes are a huge financial responsibility that we must fulfill every year. Thanks to the exemptions and deductions provided by the Income Tax Act, there are multiple means of saving taxes. The most popular of these is Section 80C. However, contrary to popular belief, tax-saving is not restricted to Section 80C alone. One of the lesser-known sections that offer tax relief is Section 80CCG, Income Tax Act.

What is Section 80CCG, Income Tax Act?

Section 80CCG, also called the RGESS (Rajiv Gandhi Equity Savings Scheme), is a section that offers tax benefits to taxpayers investing in the equity shares of Indian companies. It was introduced in the government’s 2012 Budget in order to encourage people to save along with boosting the local capital market of India. The idea was to enhance the investor strength in Indian securities, and promote financial security and inclusion.

Deductions under Section 80CCG

As is with other sections of the Income Tax Act, there are specific terms and conditions for tax deduction under 80CCG as well. They are as follows. If these are found to be non-applicable, tax benefits could be withdrawn from the taxpayer.

  • This deduction is over and above Section 80C deductions or any other deduction under another section.

  • First-time investors are allowed one deduction under Section 80CCG.

  • There is no minimum investment amount required to be eligible for deductions.

  • Deductions of up to 50%, with a monetary cap of Rs. 50,000 are available on one’s first investment. For example, person A has a taxable income of Rs.5,50,000 and has an 80CCG-eligible investment of Rs.50,000. Under this Section, Rs.25,000 (50% of his investment) becomes tax-deductible. Hence, his taxable income is now Rs.5,25,000.

  • There is a mandatory lock-in period of 3 years for the eligible investment.

  • Securities eligible for deduction under Section 80CCG should be listed under BSE 100 or CNX 100.

  • They should be PSUs (public sector undertakings). These include Navratnas, Miniratnas, Maharatnas, and select IPOs.

  • ETFs or Exchange Traded Funds are eligible for this deduction.

  • Mutual funds, too, qualify for deduction under this Section.

Eligibility for claiming deductions under Section 80CCG

As a taxpayer, there are some eligibility conditions that you need to fulfill in order to claim income tax deduction. These are set by the government carefully to ensure efficiency.

  • This Section is applicable to individual taxpayers only.

  • You have to be a first-time investor in the equity market.

  • Your gross total income should not be more than Rs.12 lakhs per annum.

  • You should have a valid Demat account which has not been used before for equity transactions or derivative transactions.

  • This account is necessary for making your first investment.

Key points Related to Section 80CCG, Income Tax Act

Here are the important points to note about Section 80CCG.

  • The Rajiv Gandhi Equity Savings Scheme (RGESS) was introduced on 21st September, 2012.

  • The scheme came into effect from the financial year 2012-13.

  • However, it had to be phased out from the year 2017 because a very small number of taxpayers was availing it.

Conclusion

Because of the phasing out of RGESS back in 2017, new equity investors in the current or next Financial Years will not be able to enjoy any benefits under Section 80CCG. However, there are numerous other avenues for investing and saving tax at the same time. One of them is a ULIP.

Tax-Saving Options Available on Finserv MARKETS

Even though RGESS has been phased out, there are still plenty of great tax-saving investment instruments available in the market. One such instrument is the ULIP (Unit Linked Insurance Plan), which comes with the highly-coveted Exempt-Exempt-Exempt status. This means that everything from the principal investment to the maturity proceeds are exempted from taxation.

You can consider opting for the Bajaj Allianz ULIPs available on Finserv MARKETS. These are comprehensive plans which offer you the dual benefit of insurance cover and investment in a single plan. They come with 4 investment portfolio strategies so that you have ample choice for your investments. You need not worry about extra costs, as there are no fund allocation charges levied upon your investment component. You can pick from two goal-based plans called Child Plan and Retirement Plan. With 2,00,000 crore AUMs (Assets Under Management), opting for ULIPs on Finserv MARKETS would indeed be a credible choice for your first investment!

FAQs

  • ✔️When was the RGESS phased out by the government?

    It was phased out from April 1, 2017.
  • ✔️Will new investors now be eligible for deduction under Section 80CCG?

    No, taxpayers making their first investment after April 1, 2017 will not be eligible for this deduction.
  • ✔️Who is currently eligible for deduction under Section 80CCG?

    Investing once in this scheme made one eligible to enjoy its benefits for three years from the year of investment. Hence, those who invested in FY 2016-17 will be able to claim benefits until the current AY i.e. AY 2019-20.

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