Section 80CCG

Section 80CCG of the Income Tax Act introduced the Rajiv Gandhi Equity Savings Scheme (RGESS). This scheme was discontinued in the Financial Year 2017-2018. RGESS aimed to encourage small investors to invest in the equity market by offering tax deductions. However, certain conditions and eligibility criteria are applied to claim this benefit.

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Disclaimer: ^Section 80C allows annual deductions of up to ₹1.5 lacs from the taxable income. Section 10(10D) provides tax-free maturity benefits for investments of up to ₹2.5 Lacs/ year, on policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

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What is Section 80CCG?

Section 80CCG provided tax relief for first-time retail investors investing in specific equity securities. It was introduced to promote equity market participation among new investors and aimed to increase financial inclusion.

Is Section 80CCG Still Valid?

Section 80CCG was discontinued from Assessment Year 2018-19. No new investments under RGESS are eligible for tax benefits now. However, deductions are allowed for those who invested before the discontinuation and meet specific conditions.

Features of Section 80CCG

The key features of Section 80CCG deductions are as follows:

Introduced for New Investors: Only first-time investors could claim this deduction.
Lock-in Period: A three-year lock-in period, with the first year being fixed and the next two years flexible.
Income Cap: Available to individuals with an income up to ₹12 lakh per year.
Investment Limit: Investments capped at ₹50,000, with a deduction of 50% on the amount invested.
Trading Restrictions: No sale is allowed in the first year, and re-investment is required if securities are sold in subsequent years to maintain the investment level.

Tax Deduction Under Section 80CCG

The deduction was 50% of the amount invested, with a maximum investment of up to ₹50,000.
Maximum deduction allowed: ₹25,000 per year.
The deduction could be claimed for up to three consecutive assessment years.

Example of Section 80CCG Deduction

Example 1: If you invested ₹40,000, the deduction would be ₹20,000 (50% of ₹40,000).
Example 2: For an investment of ₹50,000, the maximum deduction would be ₹25,000, even if you invested more.

Eligibility to Claim Deduction Under Section 80CCG

Must be a resident individual and a first-time retail investor.
Income should not exceed ₹12 lakh in the relevant financial year.
Investments should be made in eligible securities through a designated Demat account.

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Eligible Investments Under Section 80CCG

Equity shares listed on recognized stock exchanges.
Units of eligible mutual funds or ETFs.
Public sector undertakings’ shares as part of IPOs, meeting criteria such as minimum government holding and turnover requirements.

Conclusion

Section 80CCG was a beneficial tax incentive for first-time equity investors, though it is now phased out. Investments made before discontinuation must still adhere to the lock-in and compliance rules to maintain tax deductions under Section 80CCG.

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FAQs

Is 80CCG still valid?

No, Section 80CCG is not valid anymore. It was discontinued starting from the Assessment Year 2018-19. Tax benefits under the Rajiv Gandhi Equity Savings Scheme (RGESS) are no longer available for new investments.
What is under Section 80 CCD?

Section 80CCD provides tax deductions for contributions made to the National Pension System (NPS). There are two parts: 80CCD(1) for contributions by individuals, with a maximum deduction of 10% of salary (or 20% for self-employed), and 80CCD(1B), which allows an additional deduction of up to ₹50,000.
What is Section 80 CC deduction?

Section 80CC does not exist as a standalone provision in the Income Tax Act. It is sometimes confused with other sections like 80C, which covers deductions for investments in life insurance, ELSS, PPF, and more, up to ₹1.5 lakh annually.
What is Section 80?

Section 80 broadly refers to various sub-sections of the Income Tax Act that provide deductions for taxpayers. These include sections like 80C (investments), 80D (health insurance premiums), and others aimed at reducing taxable income through eligible expenses and investments.

˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
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