Things you should know about - Gold Deposit Scheme

Govt. of India has announced Gold Deposit Scheme recently. India is the largest consumer of the gold and Major part of that is imported. A huge amount of India’s wealth is lying idle in form of gold and it is not productively contributing to the India’s growth story. To tackle this, Government of India has come out with the two new schemes primarily targeted at tapping   the idle gold with Indian households and institutions and further giving an alternative   for actually buying the physical gold. The two schemes are Gold Deposit Scheme and Gold Bond Scheme. Gold Bonds will be issued by RBI and Gold Deposits will be implemented through Banks.

Gold Deposit Scheme: - You can open a account with a bank with KYC norms and deposit gold in any form coins, bars or ornaments. You will be provided with a provisional receipt. Bank will then forward that gold to refineries where it will be melted and hallmarked for purity with XRF machine. At this point if the depositor is not happy with the valuation he can take the gold back by paying nominal charges. If valuation is agreed upon, Gold deposit will be issued by a nodal branch. The whole process will take around 90 days. Depositor will be getting interest on his gold deposits i.e. 2% to 3 %. On maturity depositor can either have gold or cash as per his preference. The Gold price on the day of maturity will be the basis of repayment.

 Conditions:-

  • Eligibility :- Any Individual, HUF, Trust and Company
  • Tenure :- The deposit tenure will be 3,4,or 7 years
  • Interest rate: - 2% to 3 %
  • Repayment: - In Gold or equivalent amount of rupees.

Benefits:-

  • Loan Facility against gold deposit
  • Tax benefits- exemption from wealth tax, income tax and capital gain tax.
  • Generation of income from gold instead of paying for the safe keeping in locker.
  • Can achieve safety, income and liquidity of gold asset at one go.

Drawbacks:-

  • Minimum quantity 30 gms gold
  • Penalty for premature payment before lock in period of 1 year

Government’s Role: - Government: Government also wants to mint “India Gold Coins” with this gold which will be then given to jewelry makers that will curb gold imports. Government will bear the risk of price appreciation in gold prize in future.  Govt. will have to ensure the smooth functioning of the set-up.

Impact:-

On ETF’s :- Gold deposits have advantage over ETF’s as ETF’s  charge management fees and is also taxable for capital gains. Whereas the gold deposits will not attract any tax liability rather it will generate income for the depositor.

In conclusion, it’s a good option to mobilize your gold investments in productive use and earn. As far Financial Planning principles are concerned gold as asset class is should have maximum asset allocation of 5 %.

 

 

 

 

Last modified on Wednesday, 10 February 2016 06:28

Prakash Praharaj

Shri Prakash Praharaj has a passion for excellence. He has been awarded two gold medals for securing top positions both in Graduation and Post Graduation in Commerce. He is an MBA with specialization in Finance and marketing. He has been awarded Diploma in Treasury, Investment and Risk Management besides CAIIB from the Indian Institute of Bankers. He is a Certified Financial PlannerCM from the Financial Planning standards Board, India (FPSB), affiliated to FPSB, Denver, USA and Certified Personal Financial Adviser from NISM. He is also a SEBI registered Investment Adviser vide Reg. no. INA 000000045 dated 2nd August 2013.His book "Your Every day guide to Personal Finance and Insurance" has been published by CNBC TV 18 in August 2015.

6 comments

  • mamata

    posted by mamata

    Wednesday, 10 February 2016 11:39

    everyone should know all these information

    Report
  • aardhya

    posted by aardhya

    Wednesday, 10 February 2016 11:37

    Bloggers like you are very few on World Wide Web and I am happy to found you.

    Report
  • B.Das

    posted by B.Das

    Thursday, 17 December 2015 06:24

    Excellent one

    Report
  • S Tripathy

    posted by S Tripathy

    Thursday, 17 December 2015 06:08

    Please continue to post good articles

    Report
  • aishwarya mishra

    posted by aishwarya mishra

    Thursday, 17 December 2015 06:05

    Useful one.

    Report
  • Sujata Aniruddha Sapkal

    posted by Sujata Aniruddha Sapkal

    Wednesday, 23 September 2015 10:42

    Excellent opportunity to get u r gold hallmarked for purity and earn return on your gold investments ....while achieving the safety of u r gold assets that too free of cost.

    Its a win-win situation.

    Report

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