I want to invest in RGESS. Please tell me whether I should invest in stocks? If it is not advisable, then which mutual funds should I invest under RGESS? My risk taking capacity is very high. I wish to buy these funds --Goldman Sachs Nifty Junior BeES Fund Goldman Sachs Banking BeES Fund--for a period of three years. Please help.
- Nikhil Gupta
Rajiv Gandhi Equity Savings Scheme (RGESS) aims to encourage first time investors to invest in equity markets. This scheme would give tax benefits to new investors whose annual income is below ₹12 lakh. This benefit is available for three successive years and above the existing one lakh exemption U/S 80C.
Investments in RGESS are capped at ₹50,000 per individual, with a tax deduction of 50 per cent on the amount invested. The scheme allows investments only from new investors who have never traded in equities through a demat account. Investors in equity funds, and those holding physical share certificates are eligible to invest. RGESS investments have a lock-in period of three years. However, one is allowed to trade in them after the first year on certain terms and conditions. These conditions require you to maintain your demat account at a value equal to or higher than the amount claimed for tax deduction.
To put it simply, if you invested ₹50,000 in the first year which becomes ₹55,000 after a year; you will need to have equity worth ₹55,000 or more in your account at any point of time in the second and third year. You need to buy equities worth the amount you sell. RGESS is considered a complicated product, invest only if you understand it.
There are many ETFs that qualify under the Rajiv Gandhi Equity Savings Scheme. Click Here.