Section 80CCG Deduction

If you were new to the stock market, Section 80CCG once gave you a nice tax saving. It was called the Rajiv Gandhi Equity Saving Scheme. The government started it to help first-time investors put money into shares and mutual funds. The scheme stopped in 2017, but knowing how it worked is still helpful.

What was Section 80CCG

This rule allowed new investors to claim a 50 percent tax deduction on what they invested. The limit was 50,000 rupees, so you could save tax on up to 25,000 rupees. This was separate from the 1.5 lakh limit under Section 80C.

Who could use it

• Only first-time investors.
• Income had to be below 12 lakh rupees a year.
• The money had to go into certain shares or mutual funds, like those in BSE-100 or CNX-100, or PSU companies such as BHEL or Coal India.

How it worked

Let’s take an example.
Ravi was investing for the first time. He bought shares worth 50,000 rupees from the BSE-100 list. He got a tax deduction of 25,000 rupees. The rule said he had to hold the shares for three years. In the first year, he could not sell them. In the next two years, he could sell only if he bought new eligible shares again.

Important points

• Only for first-time investors.
• Maximum tax saving was 25,000 rupees.
• Lock-in period was three years.

Stopped after 2017.

Section 80CCG was a good way for beginners to save tax and learn how stock investing works. Even though it’s not active now, it set the path for many first-time investors to start building wealth.