The following article describes the complete details of Rajiv Gandhi Equity Savings Scheme (RGESS). This is part 2 of series 3. This article will explain all the features, benefits, eligibility criteria and all other info in detail for the benefit of investors.
Can I invest more than Rs.50,000 and claim tax benefit under RGESS?
You may invest any amount in a demat account designated under RGESS, but the benefit under the Scheme can be claimed only on investment up to Rs. 50,000. However, you have the freedom to select the stocks to be kept under lock-in for upto Rs. 50,000 for claiming benefits under RGESS. It may be noted that the depository would be automatically locking-in all the eligible securities which comes into an RGESS designated demat account during the first financial year upto a value of Rs. 50000. Hence, ensure that you intimate the depository participant through Form B within one month from the date of transaction, about those investments which you do not want to keep as part of RGESS investment in the first year, such that you have the right to sell / pledge those securities at any time. Once an application is made through Form B, that particular security cannot be brought back under RGESS while claiming for tax benefit in the first year. In subsequent years of flexible lock-in period, if that stock is still an eligible security under RGESS provisions, then the same will be counted towards valuation of RGESS portfolio irrespective of its status as an “eligible security” during the first year.
I have purchased shares of Company ‘A’ which is an eligible security under RGESS for Rs.70,000; How can I free the investments beyond Rs. 50,000/-?
If you have purchased shares under RGESS for Rs. 70,000/-, the depositories will place shares amounting to only Rs. 50,000/- under fixed lock-in. Shares amounting Rs. 20,000 will not be under lock-in. However, if you are selective about the stocks to be kept under lock-in, then intimate the depository as mentioned in Q. No. 21
When should I submit Form B? Is there a time limit?
You need to submit Form B to the depository participant, if you wish to keep any securities outside RGESS’s terms and conditions. This needs to be submitted within one month from the date of purchase / allotment of that security.
As per the Notification, Depositories are required to submit the report to Income Tax Department regarding RGESS beneficiaries within a period of thirty days from the end of the relevant financial year i.e. by 30th April.
Hence, to avoid wrong reporting by Depositories on your investments to Income Tax Department, you are advised to submit declaration in Form B to the depository participants for the credits received during the month of March at the earliest and preferably by April 15th.
Can I claim tax deduction in respect of the amount invested in eligible securities which are specified in Form B?
How to make RGESS eligible investments?
Open a new demat account with any DP and designate it under RGESS or designate your existing demat account under RGESS through Form A. If you want to avail of Basic Service Demat Account facility, you may inform your DP to designate your account accordingly.
You may approach any SEBI registered stock broker for opening a trading account for making investment in any eligible stocks in the stock market or for applying for eligible IPOs.
In case you are investing in mutual funds through any distributor, you need to simply provide your demat account details like Demat Account Number and DP ID for receiving credit of the mutual fund units into the demat account.
For investing in any IPO/NFO of the eligible securities, you can subscribe for the same and provide your demat account details like Demat Account Number and DP ID for receiving credit of the eligible securities into the demat account.
What will be the mode of holding eligible securities?
The mode of holding eligible securities under RGESS will be in a ‘Demat account’. You cannot hold securities in physical form to enjoy the benefits of RGESS.
Should I need to get my mutual fund / ETF units also in demat form?
Yes. For getting your mutual fund units in demat form, make a request with your Asset Management Company or RTA. For more details please see the instructions / guidance of CDSL and NSDL.
Is there any need for the investor to open a dedicated demat account for availing of RGESS benefits? Can I hold other securities i.e., other than eligible securities in my demat account designated for RGESS?
There is no need to open a separate dedicated account for availing of the RGESS benefits. The demat account through which RGESS benefits are being availed of can be used to keep shares/ securities other than RGESS -compliant securities. Investments in shares other than RGESS-compliant securities shall not be subject to the conditions of RGESS, nor shall be counted for extending the tax benefits under RGESS.
Is credit received in my demat account through off market trade or through dematerialisation eligible for claiming benefits under RGESS?
No. However, in the years of flexible lock-in (i.e., after the first year) all RGESS eligible securities would be counted towards checking for compliance of the investor with the Scheme, irrespective of whether it was acquired off market or came in through dematerialization.
How to open RGESS demat account with a Depository Participant (DP)?
You may approach any registered DP to open a demat account under RGESS. The list of DPs registered with NSDL and CDSL may be seen here.
You are required to fulfill the Know your client (KYC) norms prescribed by SEBI by submitting proof of identity, proof of address, etc. and provide PAN to the DP with whom you wish to open a demat account along with a declaration in prescribed format (i.e., ‘Form A’) for availing RGESS benefits.
For more details see the FAQ given by NSDL and CDSL
How to open a trading account?
You can contact a broker (trading member) or a sub broker registered with SEBI for carrying out your transactions pertaining to the capital market. See the list of registered brokers / sub brokers on the SEBI website.
What are the documents I need to bring for opening a demat / trading account?
You have to submit the following with the prescribed account opening form. In case you want to open account jointly with other person(s), following should be submitted for all the account holders
Self-attested copy of PAN card and copies of passport size photograph is mandatory for all. Copies of all the documents submitted by the applicant should be self-attested and accompanied by originals for verification. In case the original of any document is not produced for verification, then the copies should be properly attested by entities authorized for attesting the documents.
Proof of Identity (POI)
- Voter ID Card
- Driving license
- PAN card with photograph
- Aadhar (Unique ID) letter
- Identity card/document with applicant’s Photo, issued by a) Central/State Government and its Departments, b) Statutory/Regulatory Authorities, c) Public Sector Undertakings, d) Scheduled Commercial Banks, e) Public Financial Institutions, f) Colleges affiliated to Universities (this can be treated as valid only till the time the applicant is a student), g) Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their Members; and h) Credit cards/Debit cards issued by Banks
Proof of Address (POA)
- Ration card
- Voter ID Card
- Driving license
- Bank passbook
- Verified copies of utility bills like Electricity bills, gas bills (not more than two months old)/ Residence Telephone bills (not more than two months old)/ Registered lease or sale agreement of residence / Flat maintenance bill / insurance copy
- Bank account statement / pass book
- Self-declaration by High Court & Supreme Court judges, giving the new address in respect of their own accounts.
- Proof of address issued by any of the following: Bank Managers of Scheduled Commercial Banks/ Scheduled Co-Operative Bank/Multinational Foreign Banks/ Gazetted Officer/Notary public/ Elected representatives to the Legislative Assembly/Parliament/Documents issued by any Govt. or Statutory Authority.
- Identity card/document with address, issued by a) Central/State Government and its Departments, b) Statutory/Regulatory Authorities, c) Public Sector Undertakings, d) Scheduled Commercial Banks, e) Public Financial Institutions, f) Colleges affiliated to universities (this can be treated as valid only till the time the applicant is a student); and g) Professional Bodies such as ICAI, ICWAI, Bar Council etc., to their Members.
List of people authorized to attest the documents: Notary Public, Gazetted Officer, Manager of a Scheduled Commercial/ Co-operative Bank or Multinational Foreign Banks (Name, Designation & Seal should be affixed on the copy).
You must remember to take original documents to your DP / trading member for verification. Your DP / trading member will carry-out “in-person verification” of account holder(s) at the time of opening your account. You should remember to obtain a copy of the agreement and schedule of charges for your future reference.
Your DP / trading member may ask an additional proof of identity/address
I belong to PAN exempt category (resident of Sikkim) Can I open an RGESS account without PAN?
For availing benefits under RGESS, PAN is made mandatory even if you belong to PAN exempt category.
Should I ask for internet access to my trading and demat accounts?
Yes, it is preferable. This would facilitate you to keep a real time track of your account and the value of securities held therein.
Can I designate an existing demat account under RGESS?
Yes, provided you are eligible as a ‘new retail investor’ under RGESS. To designate your existing demat account under RGESS you need to submit a declaration in prescribed format (i.e., ‘Form A’) to your DP.
Where will I get ‘Form A’ Form “B” etc?
You can get ‘Form A’ and Form ‘B’ from your DP or download it from the website directly.
Can I designate or open more than one demat account for RGESS?
No. You can have only one demat account under RGESS, across depositories (i.e., NSDL / CDSL).
Is there a low cost demat account for RGESS?
With a view to achieve wider financial inclusion, encourage holding of demat accounts and to reduce the cost of maintaining securities in demat accounts for retail individual investors, it has been decided on 27 August 2012 that all depository participants (DPs) shall make available a “Basic Services Demat Account” (BSDA) with limited services to all the individuals who have or propose to have only o ne demat account, where they are the sole or first holder, with value of securities held in that demat account not exceeding Rupees 2 lakhs at any point of time. For such demat accounts no Annual Maintenance Charges (AMC) will be levied by DPs, if the value of holding is upto Rs. 50,000. For the value of holding from Rs 50,001 to Rs 200,000, AMC is stipulated to not exceed Rs 100. The first time investors can make use of BSDA and reduce their cost of operations in the equity market by designating their RGESS account also as a BSDA account.
The comparative charges of opening demat accounts with various Depository Participants may be seen from the respective websites of Depositories – NSDL and CDSL.
What are the do’s and don’ts while operating in securities market?
Please see the SEBI guidelines in this regard. Please see the websites of Exchanges – BSE and NSE for safety advices. See the investor guides of NSDL and CDSL too.
SEBI maintains an updated, comprehensive website for education of investors (www.investor.sebi.gov.in). Please go through the materials given in there, before making investments in securities market.
How can I register my complaints with respect to my transactions in securities market?
In the event of any complaint you should first approach the concerned company/ intermediary against whom you have a complaint / grievance. SEBI has directed all the stock exchanges, registered brokers, sub-brokers, depositories, mutual funds and listed companies to make a provision for a special email ID of the grievance
redressal division/ compliance officer for the purpose of registering complaints by the investors.
If the complaint is not resolved at the level of company / intermediary you may approach the concerned depository / Exchange.
Depositories and Stock Exchanges have set up investor grievance redressal cells for fast redressal of investor complaints relating to securities markets. Exchanges have set up an Investor Protection Fund (IPF) to meet the claims of investors against defaulter brokers; The Exchanges and depositories also assist in arbitration process between brokers/ depository participants and investors.
Please see the websites of Exchanges – BSE and NSE – and Depositories – NSDL & CDSL -regarding the details of investor grievance redressal mechanisms.
If the complaint is not resolved at the level of exchanges / depositories , you may escalate the complaint to the market regulator, SEBI. SEBI also directly takes up complaints related to issue and transfer of securities and non-payment of dividend with listed companies. In addition, SEBI also takes up complaints against the various intermediaries registered with it like mutual funds, stock brokers and related issues. SEBI has also set up a mechanism for redressal of investor grievances arising from the issue process.
SEBI commenced a new web based centralized grievance redress system called as SCORES (SEBI Complaints Redress System) on June 8, 2011. In the new system, all the activities starting from lodging of a complaint till its closure by SEBI are online in an automated environment and the status of every complaint can be viewed online in the above website at any time. An investor, who is not familiar with SCORES or does not have access to SCORES, can also lodge complaints in physical form. Such complaints are scanned and uploaded in SCORES for processing. In view of above, all grievances received will be in electronic mode with facility for online updation of Action Taken Reports by the users.
Investors can write/ call/ mail their query to [email protected] and their queries are replied.
The toll free helpline service numbers 1800 22 7575 / 1800 266 7575 are available to investors from all over India and is in 14 languages viz. English, Hindi, Marathi, Gujarati, Tamil, Bengali, Malayalam, Telugu, Urdu, Oriya, Punjabi, Kannada, Assamese and Kashmiri. The toll free helpline service is available on all days from 9:30 a.m to 5:30 p.m (excluding declared holidays). Further, SEBI has opened local offices at Bangalore, Bhubaneshwar, Chandigarh, Guwahati, Hyderabad, Indore, Jaipur, Kochi, Lucknow and Patna to provide the service to the investors in these localities.
You can also approach Capital Market Division, Department of Economic Affairs, Ministry of Finance for resolving your grievances / submitting your suggestions.