Conditions for availing Tax exemption under section 80CCG
New Section 80CCG provides Income tax exemption with effect from the assessment year 2013-14 in respect of investment made under certain equity saving schemes. The deduction under this section is available only if following conditions are satisfied:
This Income tax exemption is available only for Individuals. No HUF can avail this exemption.
The individual must be resident individuals (both ordinarily resident or not ordinarily resident).
The Gross total income of such individual must not exceed Rs. 10 Lakhs.
The listed shares must be in the notified schemes.
The investment must be in first time investment in shares.
The lock in period of investment in this scheme is 3 years.
The maximum exemption limit under this scheme is Rs. 25000 which is 50% of the investment, up to a maximum investment of Rs. 50000.
Only the Investment in the first year is exempted and the investment is subsequent years is not qualified for tax exemption.
If the tax payer is not completed any of the abovementioned conditions, the tax exemption will be withdrawn and the amount will be taxable in the year of default.
Demerits & Confusions of the Rajiv Gandhi Equity Saving Scheme
It is not easy for the new investors to find such notified shares in the first time and the benefit is available only in the first time.
In all other tax exemption under section 80C is fully exempted up to a total investment of Rs. 100000. But here only 50% is available for tax exemption.
There are so many confusions in this scheme. It is not certain that if an individual avail only a part of the amount as exemption say Rs. 15000 and whether the remaining 10000 can claim in the next year.
Just for a years Tax exemption of Rs. 25000 the tax payer should open a demat account and complete all formalities of such a demat account, which he could not understand handle easily.
If, the investor violates any condition in the subsequent years the exemption will be withdrawn, so the possibility of considering the investment scheme is very less while calculating the tax liability of salaried employees by the employer for TDS purpose.
As per the prospectus of the scheme the scheme is to promote direct investment in equities. But the conditions seem that the scheme will not be welcomed warmly by new investors. It seems the things are made a little bit complicated.