Income-tax law | Historical equity investment deduction
Section 80CCG: Rajiv Gandhi Equity Savings Scheme (RGESS) Deduction
Section 80CCG of the Income-tax Act, 1961 provided a tax deduction to eligible first-time retail equity investors under the notified Rajiv Gandhi Equity Savings Scheme (RGESS). It is a discontinued deduction, not an incentive for new investments in 2026.
Meaning and purpose of Section 80CCG
The provision encouraged eligible resident individuals who were new retail investors to invest in notified listed equity shares or listed units of equity-oriented funds. Its benefit was linked to a specified government scheme, not to all shares or mutual funds. The tax deduction and the three-year investment lock-in were separate from the market risks of the securities.
Eligibility and statutory conditions
| Requirement | Historical Section 80CCG rule |
|---|---|
| Eligible taxpayer | Resident individual; not HUF or company |
| Investor status | New retail investor as defined by the notified scheme |
| Gross total income | Not more than Rs. 12 lakh for the relevant assessment year under the amended provision |
| Qualifying investment | Specified listed equity shares or listed units of an equity-oriented fund under RGESS |
| Deduction | 50% of eligible investment, limited to Rs. 25,000 |
| Lock-in | Three years from acquisition, subject to the scheme's conditions |
| Period | Up to three consecutive assessment years, subject to eligibility and the statutory sunset |
The original income threshold was Rs. 10 lakh; the Finance Act, 2013 raised it to Rs. 12 lakh with effect from 1 April 2014. Exact scheme conditions, eligible securities and investor status must be assessed against the rules applicable to the investment year.
How the Rs. 25,000 deduction worked
An eligible investment of Rs. 30,000 could produce a deduction of Rs. 15,000 (50% of the investment). An eligible investment of Rs. 60,000 could produce a deduction of Rs. 25,000, because the statutory maximum deduction was Rs. 25,000. The maximum deduction was not Rs. 50,000: that was the investment amount at which the 50% deduction reached its cap.
Under the amended provision, the deduction could be available for three consecutive assessment years starting with the year of first qualifying acquisition, subject to the scheme, statutory restrictions and subsequent discontinuance provisions.
Three-year lock-in and withdrawal of deduction
Section 80CCG(3) required a three-year lock-in from acquisition in accordance with the notified scheme. If a taxpayer failed to satisfy a condition, Section 80CCG(4) treated the deduction originally allowed as income in the year of the failure, taxable for the corresponding assessment year. The scheme's detailed lock-in and permitted dealing rules must be checked before determining whether a breach occurred.
When did Section 80CCG end?
Section 80CCG(5), inserted by the Finance Act, 2017, prevented the deduction for assessment years beginning on or after 1 April 2018. A grandfathering proviso protected otherwise eligible taxpayers who had acquired qualifying securities and claimed the deduction for an assessment year commencing on or before 1 April 2017, allowing the remaining qualifying benefit only up to the assessment year commencing 1 April 2019. This was not an extension for new investors.
The Income-tax Act, 2025 applies from 1 April 2026. It does not revive the expired RGESS deduction. Historical returns, assessments or disputes must be examined under the legislation and scheme conditions relevant to those earlier years.
RGESS versus ELSS and other equity investments
RGESS under Section 80CCG was a targeted deduction for specified first-time equity investors and is discontinued. Equity Linked Savings Schemes (ELSS) are a different category of tax-saving mutual fund investment, historically relevant to Section 80C subject to the applicable tax regime and year. Section 80CCB was an older, distinct provision and should not be confused with either scheme.
Original Section 80CCG statutory text and amendment history
The following statutory extract and legislative notes are retained from the original webpage for historical reference. The extract must be read with subsequent enactments and applicable notifications.
1(1) Where an assessee, being a resident individual, has, in a previous year, acquired listed equity shares 2 or listed units of an equity oriented fund in accordance with a scheme, as may be notified by the Central Government in this behalf, he shall, subject to the provisions of sub-section (3), be allowed a deduction, in the computation of his total income of the assessment year relevant to such previous year, of fifty per cent of the amount invested in such equity shares 2 or units to the extent such deduction does not exceed twenty-five thousand rupees.
3 (2) The deduction under sub-section (1) shall be allowed in accordance with, and subject to, the provisions of this section for three consecutive assessment years, beginning with the assessment year relevant to the previous year in which the listed equity shares or listed units of equity oriented fund were first acquired.
(3) The deduction under sub-section (1) shall be subject to the following conditions, namely:-
(i) the gross total income of the assessee for the relevant assessment year shall not exceed 4 twelve lakh rupees;
(ii) the assessee is a new retail investor as may be specified under the scheme referred to in sub-section (1);
(iii) the investment is made in such listed equity shares 2 or listed units
of equity oriented fund as may be specified under the scheme referred to in
sub-section (1);
(iv) the investment is locked-in for a period of three years from the date of
acquisition in accordance with the scheme referred to in sub-section (1); and
(v) such other condition as may be prescribed.
(4) If the assessee, in any previous year, fails to comply with any condition specified in sub-section (3), the deduction originally allowed shall be deemed to be the income of the assessee of such previous year and shall be liable to tax for the assessment year relevant to such previous year.
5 Explanation.-For the purposes of this section, "equity oriented fund" shall have the meaning assigned to it in the Explanation to clause (38) of section 10.
6 (5) Notwithstanding anything contained in sub-sections (1) to (4), no deduction under this section shall be allowed in respect of any assessment year commencing on or after the 1st day of April, 2018:
Provided that an assessee, who has acquired listed equity shares or listed units of an equity oriented fund in accordance with the scheme referred to in sub-section (1) and claimed deduction under this section for any assessment year commencing on or before the 1st day of April, 2017, shall be allowed deduction under this section till the assessment year commencing on the 1st day of April, 2019, if he is otherwise eligible to claim the deduction in accordance with the other provisions of this section.
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1. Ins. by Act 23 of 2012, s. 25 (w.e.f. 1-4-2013).
2. Ins. by Act 17 of 2013, s. 13 (w.e.f. 1-4-2014).
3. Subs. by s. 13, ibid., for sub-section (2) (w.e.f. 1-4-2014).
4. Subs. by s. 13, ibid., for "ten lakh rupees" (w.e.f. 1-4-2014).
5. Ins. by Act 17 of 2013, s. 13 (w.e.f. 1-4-2014).
6. Ins. by Act 7 of 2017, s. 34 (w.e.f. 1-4-2018).
Official legislative and scheme resources
Refer to the Income Tax Department for tax legislation and circulars, India Code for Acts, e-Gazette for scheme notifications and SEBI for applicable securities-market regulations. For a historical claim, verify the exact RGESS notification and amendment in force for the investment date.
Frequently asked questions
Can a new investor claim Section 80CCG in 2026?
No. The deduction was discontinued, with only limited transitional relief for qualifying earlier investors.
Was the deduction Rs. 25,000 or 50%?
It was 50% of the eligible amount invested, subject to a maximum deduction of Rs. 25,000.
Could an HUF claim Section 80CCG?
No. The statutory provision applied to qualifying resident individuals.
What happened if lock-in conditions were broken?
The previously allowed deduction could be deemed taxable income under Section 80CCG(4), depending on the breach and applicable scheme rules.
General legal information only. Historical eligibility depends on the assessment year, notifications and individual facts.