Section 80CCG, also known as the Rajiv Gandhi Equity Savings Scheme (RGESS), was introduced under the Income Tax Act in India to incentivize first-time equity investors. The scheme aimed to encourage individuals to save while fostering growth in India’s capital markets. Though phased out in 2017, understanding Section 80CCG is valuable for grasping India’s tax-saving instruments and the government’s previous strategies to stimulate financial inclusion and long-term investments.
Under Section 80CCG, eligible investors could claim deductions on investments in specific equity-based instruments, helping them save on taxes. This section encourages long-term investments in equity markets, introducing retail investors to the market and promoting economic stability.
The primary aim of Section 80CCG was to encourage new retail investors to participate in the equity markets by offering a tax deduction on investments in equities and equity-oriented funds. In doing so, the government hoped to:
Section 80CCG offered first-time equity investors a 50% deduction on investments in specified equity instruments, up to a maximum investment of ₹50,000. This deduction applied to the investor’s taxable income, reducing their overall tax burden.
For example, if an investor made their first equity investment of ₹50,000, they could claim a deduction of ₹25,000, reducing their taxable income and thus, their tax liability.
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To qualify for deductions under Section 80 CCG, investors needed to meet specific conditions:
The eligible investment avenues under Section 80 CCG included:
Authorities selected these specific investment options to balance risk with potential returns, allowing investors to invest in reputable and stable companies and funds.
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Section 80 CCG was phased out due to limited adoption and concerns over market risk. Since the scheme required new investors to engage in potentially volatile equity investments, many were reluctant to participate, and the adoption rate remained lower than anticipated. Additionally, as the government introduced other tax-saving schemes with guaranteed returns, the appeal of 80CCG diminished.
Although Section 80 CCG is no longer available, there are several other tax-saving options for investors:
Section 80CCG, or the Rajiv Gandhi Equity Savings Scheme, was a significant attempt by the government to encourage new retail investors in the equity market. Despite its phasing out in 2017, Section 80 CCG remains notable for its role in promoting investment discipline and expanding India’s investor base. Today, investors seeking tax benefits can explore other sections under the Income Tax Act, such as 80C and 80D, which continue to provide ample opportunities for tax savings and investment growth.
No, Section 80CCG was phased out on April 1, 2017. New retail investors cannot claim deductions under this section from the 2017-18 fiscal year onwards.
The maximum deduction was 50% of the investment amount, with a cap of ₹50,000. This means an eligible investor could claim a deduction of up to ₹25,000.
Section 80CCG was available only to first-time equity investors with annual income up to ₹12 lakh and required them to invest in specified equity-oriented funds or shares with a three-year lock-in.
The scheme had low adoption rates, and new investors were exposed to high market risks without guaranteed returns. These factors led to the government’s decision to phase out the scheme.
Investors can explore deductions under Section 80C (e.g., ELSS, PPF) and Section 80D (health insurance premiums) for tax-saving benefits. The National Pension System (NPS) also offers additional tax deductions under Section 80CCD(1B).
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