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These bonds will have minimum maturity of whose annual turnover is not less than
5 years. These bonds can not be issued for real Rs. 4,000 crore for each of the immediate
estate and capital markets sectors. Withholding past three years, will also be eligible.
tax of 5 per cent will be applicable on interest (vi) Exchange-traded funds (ETFs) and MFs
income from these bonds, but the capital gains that have RGESS-eligible securities have
arising in case of appreciation of the rupee will be also been brought under the RGESS.
exempted from tax. (vii) To benefit small investors, investments
are allowed in instalments in the year in
rgeSS which tax claims are made.
On 23 November, 2012, the government notified (viii) The total lock-in period for investments
a new tax saving scheme called the Rajiv Gandhi will be three years including an initial
Equity Savings Scheme (RGESS), exclusively for blanket lock-in of one year. After the first
first-time retail investors in the securities market. year, investors will be allowed to trade in
This scheme provides 50 per cent deduction of the the securities.
amount invested from taxable income for that year The broad provisions of the scheme and the
to new investors who invest up to Rs. 50,000 and income tax benefits under it have already been
whose annual income is below Rs. 10 lakh.The incorporated as a new Section 80 CCG of the
Rajiv Gandhi Equity Saving Scheme (RGESS) will Income Tax Act 1961, as amended by the Finance
give tax benefits to new investors whose annual Act 2012. The operational guidelines were issued
income is up to Rs. 10 lakh for investments up to a by SEBI on 6 December, 2012.
maximum of Rs. 50,000. The investor will get 50
per cent deduction of the amount invested from creDit Default SwaP (cDS)
taxable income for that year. Salient features of the
scheme are as follows : CDS is in operation in India since October 2011
– launched in only corporate bonds. The eligible
(i) The scheme is open to new retail investors
participants are commercial banks, primary
identified on the basis of their permanent
dealers, NBFCs, insurance companies and mutual
account numbers (PAN).
(ii) The tax deduction allowed will be over
CDS is a credit derivative transaction in which
and above the Rs. 1 lakh limit permitted
two parties enter into an agreement, whereby
allowed under Section 80 C of the one party (called as the ‘protection buyer’) pays
IncomeTax Act. the other party (called as the ‘protection seller’)
(iii) In addition to the 50 per cent tax periodic payments for the specified life of the
deduction for investments, dividend agreement. The protection seller makes no
income is also tax free. payment unless a credit event relating to a pre-
(iv) Stocks listed under BSE 100 or CNX 100, determined reference asset occurs. If such an event
or stocks of public-sector undertakings occurs, it triggers the Protection Seller’s settlement
(PSUs) that are Navratnas, Maharatnas, obligation, which can be either cash or physical
and Miniratnas will be eligible under the (India follows physical settlement). It means,
scheme. Follow-on public offers (FPOs) CDS is a credit derivative that can be used to
of these companies will also be eligible. transfer credit risk from the investor exposed to
(v) IPOs of PSUs, which are scheduled to get the risk (called protection buyer) to an investor
listed in the relevant financial year and willing to take risk (called protection seller).