tax free mutual fund details

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Page 1: Tax Free Mutual Fund Details

" To encourage the savings of the small investors in domestic capital market”

"

Page 2: Tax Free Mutual Fund Details

RGESS Rajiv Gandhi Equity Savings Scheme or RGESS is a

new equity tax advantage savings scheme forequity investors in India.

Rajiv Gandhi Equity Savings Scheme (RGESS)announced in Union Budget 2012-13 is a new equitytax advantage savings scheme for equity investorsin India.

The scheme got it's approval on September 21,2012. It is exclusively for the first time retailinvestors in securities market.

Page 3: Tax Free Mutual Fund Details

The Scheme not only encouragesthe flow of savings and improvesthe depth of domestic capitalmarkets, but also aims topromote an 'equity culture' inIndia.

This is also expected to widenthe retail investor base in theIndian securities market.

Basically its one of the bestinvestment in tax saving inIndia.

Page 4: Tax Free Mutual Fund Details

Example…

Let us say, you invest Rs.50,000 under RGESS.

The amount eligible for tax deduction fromyour income will be Rs.25,000.

Let us say, you invest Rs.40,000 under RGESS.

The amount eligible for tax deduction will beRs.20,000.

So you may save about Rs.2,575, Rs.5,150 forincome tax slabs 10% and 20% respectivelyunder this scheme.

Page 5: Tax Free Mutual Fund Details

Latest Updates…

Effective 1 April 2014, investors with a grosstotal income of up to Rs.12 Lakhs can invest inRGESS, up from an earlier income limit ofRs.10 Lakhs.

Investors can park funds in MFs and listedshares and extended tax benefits to threesuccessive years.

Page 6: Tax Free Mutual Fund Details

How the scheme works

The RGESS is only for individuals who havenot invested directly in

Equities.

including shares .

Derivatives,

* Before 23 November 2012. If you hold unitsin an equity mutual fund, you are eligible toinvest in it under the present rules.

Page 7: Tax Free Mutual Fund Details

Continuation…

If you have a demat account.

But have not used it for transactions beforethe specified date,

you can avail of the RGESS benefits.Besides, only those whose gross annualincome is up to Rs 12 Lakhs can invest.

Page 8: Tax Free Mutual Fund Details

Eligibility

Resident Individual

Annual Income< =Rs. 10 Lakhs

Demat Account Not Opened

No transactions in Equity or F&O

New Retail Investor

No transactions in Equity or F&O

Demat Account already Opened

Annual Income < =Rs. 10 Lakhs

Resident Individual

2nd & 3rd holder of an account can open a new account as 1st holder

Page 9: Tax Free Mutual Fund Details

Benefits The investor would get 50% deduction of the

amount invested during the year, up to amaximum investment of Rs.50,000 perfinancial year, from his/her taxable incomefor that year, for three consecutive assessmentyears.

It provides additional tax benefits over andabove the present tax savings schemes underthe Income Tax Act.

Gains, arising of investments in RGESS, canbe realized after a year. This is in contrast toall other tax saving instruments.

Page 10: Tax Free Mutual Fund Details

The benefits can be availed for threeconsecutive years.

Dividend payments are tax free.

This scheme has a long run benefit ofeducating the retail investment segmentand thereby moving towards financialinclusivity in the country.

Continuation…

Page 11: Tax Free Mutual Fund Details

Investments are allowed to be made ininstalments in the year in which the taxclaims are filed.

Success of this scheme can lead to transferof assets from traditional savingsinstruments such as bank deposits

FDs to the capital markets, leading todiversification in retail investor portfolioand also leading to more productive"capital formation" assets.

Continuation…

Page 12: Tax Free Mutual Fund Details

Equity Shares in BSE-100 or CNX 100

Equity Shares of Maharatna, Navratna, Miniratna

Units of eligible ETFs or MFs

Eligible FPOs & NFOs

IPOs of eligible PSUs

Eligible Securities

Page 13: Tax Free Mutual Fund Details

Securities

Deduction

Form B

Act 80CCG

AssessmentBenefits

Max Invest

Subsequent Year

Conclusion

Account

Open Account

Eligible Securities

Eligible Deduction

Form B for New Investors

80CCG Act For Eligible

Assessment Year Deduction

Benefits Under Schemes

Maximum Investment

Subsequent AssessmentYearConclusion

A New Retail Investor Can Make InvestmentsA New Retail Investor Can Make InvestmentsA New Retail Investor Can Make Investments

Page 14: Tax Free Mutual Fund Details

Open Account

Eligible Securities

Eligible Deduction

Form B for New

Investors

80CCG Act For Eligible

Assessment Year

Deduction

Benefits Under

Schemes

Maximum Investment

Subsequent Assessment

Year

Conclusion

Procedure for a new retail Investor

Page 15: Tax Free Mutual Fund Details

A Better Way to Save Tax in India

Who can invest in RGESSNew retail investors with an annual gross income of less than Rs.12 Lakhs.

How much can I investThe maximum amount eligible for claiming benefit under RGESS is Rs. 50,000.

Tax BenefitDeduction under Section 80CCG of the Income-Tax Act, 1961, is available on 50% of the amount invested. The benefit is in addition to deduction available u/s Sec 80C.

Lock-in Period3 years. Fixed lock-in during first year followed by a flexible lock-in for subsequent two years.

Page 16: Tax Free Mutual Fund Details

Flexible lock-in period

The RGESS investment has a lock-in periodof three years. However, there is flexibilityafter the first year of investment.

This means that during the first year oflock-in period, the investor cannot sell theholdings for which he claims tax benefit.

From the second year onwards, he can sell aportion of his holdings, provided hemaintains the aggregate value in hisaccount for which benefit is claimed for thenext two years.

Page 17: Tax Free Mutual Fund Details

For instance, if your initial investment ofRs 50,000 rises to Rs 60,000 after the endof first year of the lock-in period, you cansell Rs 10,000 worth of securities andmaintain Rs 50,000 in the account for thenext two years.

However, if the value declines to Rs40,000, you are not required to make upthe balance. However, if you choose to sella part of your holdings from Rs 40,000,you will need to replenish it.

Page 18: Tax Free Mutual Fund Details

May you think your investment in the right way

Ekarup

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[email protected]

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