Finance Act 2012 has come up with a new section 80CCG, to be made applicable from F.Y. 2012-13 onwards.
The Scheme not only encourages the flow of savings and improves the depth of domestic capital markets, but also aims to promote an ‘equity culture’ in India. This is also expected to widen the retail investor base in the Indian securities market.
Salient features of the Scheme are as under:
Eligible Investors: Scheme is open to new retail investors, identified on the basis of their PAN numbers. This includes those who have opened the Demat Account but have not made any transaction in equity and /or in derivatives till the date of notification of this Scheme and all those account holders other than the first account holder who wish to open a fresh account.
Those assessees(only individual assessees) whose annual taxable income is ≤ Rs. 10 lakhs are eligible under the Scheme.
Max. Amount: The maximum Investment permissible under the Scheme is Rs. 50,000 and the investor would get a 50% deduction of the amount invested from the taxable income for that year.
Eligible Securities: Under the Scheme, those stocks listed under the BSE 100 or CNX 100, or those of public sector undertakings which are Navratnas, Maharatnas and Miniratnas would be eligible. Follow-on Public Offers (FPOs) of the above companies would also be eligible under the Scheme. IPOs of PSUs, which are getting listed in the relevant financial year and whose annual turnover is not less than Rs. 4000 Crore for each of the immediate past three years, would also be eligible.
In addition, considering the requests from various stakeholders, Exchange Traded Funds (ETFs) and Mutual Funds (MFs) that have RGESS eligible securities as their underlying and are listed and traded in the stock exchanges and settled through a depository mechanism have also been brought under the scheme.
Lock In Period: The total lock-in period for investments under the Scheme would be three years including an initial blanket lock-in period of one year, commencing from the date of last purchase of securities under the scheme.
The initial first year is known as Fixed Lock-in Period, in which no trading of securities is allowed.
After the first year, investors would be allowed to trade in the securities in furtherance of the goal of promoting an equity culture and as a provision to protect them from adverse market movements or stock specific risks as well as to give them avenues to realize profits.
Valuation: For the purpose of valuation of shares, the closing price as on the previous day of the date of trading will be considered so that new investors are certain about their debits and credits into the account.
The deduction under Section 80CCG will be allowed in addition to the 1 lakh limit allowed under section 80CCE covering the sections 80C, 80CCC and 80CCD.
Moreover, it will be allowed to all the Individual Assessees irrespective of his/her source of income. In short, a salaried person can also avail the benefit of this scheme.
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