The Rajiv Gandhi Equity Savings Scheme (RGESS) was introduced by P. Chidambaram, then Finance Minister of India, in the 2012-13 Union Budget. The main purpose of the scheme was to encourage Indians to channel their savings into the equity markets by offering tax benefits.

To be eligible for the scheme, one had to be a first time investor with annual earnings of less than 12 lakh rupees (increased from 10 lakhs initially). Another necessity was that the individual should not have had a Demat account prior to November 23rd 2012, or should not have engaged in any trading if he/she happens to have already opened a Demat account. 

In the case of joint accounts, only the first account holder was not eligible for the scheme. All other subsequent account holders were considered as new investors, and as such, became eligible. If the first account holder had not engaged in trading activities, then he/she too was able to avail of the scheme. 

The scheme allowed a maximum investment of up to 50,000 rupees, of which 50% was tax-deductible. The top 100 stocks listed on the Sensex and Nifty indices were deemed to meet the criteria to be eligible for the scheme. Shares of public sector enterprises which fell under the categories of ‘Maharatna’, ‘Navratna’, and ‘Miniratna’ were also eligible, along with specific exchange-traded funds and mutual funds, provided they meet the criteria specified by the government. 

When it came to unlisted shares, Initial Public Offerings of public sector undertakings where the government had at least a 51% holding, were scheduled to become listed during the relevant financial year, and had an annual turnover of not less than ₹4,000 crore for each of the immediate past three years, were also eligible under the scheme. 

The intent of the scheme was commendable in a country where equity participation has remained relatively low. However, in the Union Budget of 2017, the then Finance Minister Arun Jaitley, announced that the scheme would be phased out due to an apparent lack of adoption. Those who have invested earlier will continue to benefit, but new investors cannot join the scheme.