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Difference between RGESS and ELSS


Budget 2012 introduced RGESS ( Rajiv Gandhi Equity Saving Scheme ), a scheme which allows tax rebate/tax deduction for investment in specified equity schemes. Since there already exists another similarly structured scheme called the ELSS ( Equity Linked Saving Scheme ) under which an investor can claim tax rebate u/s 80C up to Rs. 1 Lakh, it is important to understand the differences between the two.

  1. RGESS and ELSS are mutually exclusive, as the former doesn’t come under the section 80 C limit. Hence, a new investor can invest in both of these.
  2. In ELSS a maximum of Rs 1 lakh is directly deducted from the gross taxable income of the investor, thereby reducing his tax liability according to his income tax slab. RGESS allows investors to invest upto Rs 50,000/- and claim an income tax deduction of 50 % i.e upto Rs. 25,000/-.
  3. In ELSS, the investments have to be made in specified mutual funds, while in ELSS, investments can be made directly in a combination of specified stocks and IPOs of PSUs, equity mutual funds or ETFs( Exchange Traded Funds).
  4. ELSS has a lock-in period of 3 years and cannot be withdrawn in between. RGESS also has a 3 year lock-in, but trading is allowed after 1 year subject to conditions.
  5. Investors can make fresh ELSS investments every financial year and claim tax rebate, while the RGESS scheme can be availed only once in a lifetime.
  6. ELSS is believed to be less riskier as the investment is in diversified mutual funds, while RGESS which invests in direct equity and ETFs is believed to be more riskier.
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