Gold monetisation scheme is like a gold savings account. You would generally keep your gold without any security at home or store it in bank lockers by paying a maintenance fee. But instead of that, you could keep your gold in any form in a Gold Monetisation Scheme account and earn interest as the price of the precious metal goes up.
The Gold Monetisation Scheme is relatively new – it was introduced by the Central Government only in 2015-16. The objective is to simultaneously safeguard the gold held in Indian households as well as put it to productive use. The larger objective is to cut down the country’s gold imports by decreasing domestic demand. India, incidentally, is the second-largest consumer of gold after China.
What makes the Gold Monetisation Scheme attractive? Why should you invest your gold in it? Let us take a look at the 10 features of the scheme that make it a great place to park your gold.
- Easy storage of your gold: The general tendency among Indians is to deposit their gold in storage lockers in banks and take it out for weddings/family functions or to sell it off. However, you have to pay an annual fee to the bank for the storage locker. This means that you are actually spending money just to keep your gold safe. Gold Monetisation Scheme offers security to your gold by not only storing it but also returning it to you in the form of money or physical gold when the plan attains maturity.
- Utility for your gold: Keeping your old or unutilised gold inside a safe deposit locker in your house or even in a bank means that your gold is lying idle and gives you no benefit. Even if you sell off the gold, you only earn spot money. But depositing it in the Gold Monetisation Scheme will not only get you interest money, but you also have the option of encashing the gold at maturity. This way, you can take advantage of the appreciating value of gold.
- Flexibility in deposits: You can deposit your gold in any form under the Gold Monetisation Scheme. You could put in gold bars or coins, and even jewellery. However, gold jewellery encrusted with gemstones cannot be deposited in this scheme.
- Flexibility in quantity of deposit: The minimum deposit you can make in a gold monetisation scheme is 30 grams of any purity. There is no maximum limit.
- Convenient tenures: There are 3 term deposit plans available under the Gold Monetisation Scheme:
- Short term: 1 to 3 years
- Medium term: 5 to 7 years
- Long term: 12 to 15 years
If you have to withdraw the deposit before the end of the tenure, you can do so by paying a small penalty.
- Attractive interest rates: For a product that usually remains idle in homes and lockers, the precious metal will earn you between 0.5% to 2.5% interest depending on the period of deposit. Short-term deposit rates are decided by the banks concerned, while the medium and long-term deposit interest rates are decided by the Central Government. The interest rates currently being offered is as follows:
- Short-term rates (at SBI): 0.5% p.a. for 1 year, 0.55% for 2 years, 0.60% for 3 years.
- Medium-term rates: 2.25% p.a. for 5 to 7 years.
- Long-term rates: 2.5% p.a. for 12 to 15 years.
- Variety in interest calculation: The short-term bank deposit under the Gold Monetisation Scheme does not calculate interest in the form of money. It gives you interest in the form of gold in grams. So if the interest is 1% per annum, you get 1 gram on 100 grams. However, the medium and long-term government deposit schemes calculate the interest in the form of rupees with reference to the value of gold at the time of deposit. So if you deposited 50 grams at a value of Rs. 1,50,000 and the interest rate is 2.5%, you will get Rs. 3,750 as interest in a year.
- Withdrawal of the deposit: For short-term plans, you can specify at the time of deposit whether you want the returns to be made to you in the form of money or physical gold. If you choose to have your returns as physical gold, you get it as gold coins or bars in 995 fineness. You do not get your jewellery back in the same form as you put them in, because the banks are not storing your gold. Banks convert the gold you deposit into bullion or coins and either send it to Metals and Minerals Trading Corporation of India for minting India Gold Coins, or sell it to jewellers or other banks.
- Verification of purity: Over 330 Collection and Purity Testing Centres have been approved across the country to evaluate and verify the purity of the gold being deposited. Once you open a gold monetisation scheme account in a bank, you will have to take your gold to the nearest government-approved collection centre, where the purity and quantity of your gold will be checked. The centre will take your gold and provide you a receipt for the gold quantity, which will be converted to a scheme certificate when deposited in the bank.
- Tax benefits: You do not have to pay capital gains tax on the profits made through the gold monetisation scheme. The capital gains are also exempt from wealth tax and income tax.
The Gold Monetisation Scheme is a great opportunity for big Indian households to make profits from the old jewellery lying in bank lockers and at the bottom of safe deposit boxes. Companies, trusts, jewelleries and individuals who have a hoard of gold can also use this scheme to monetise their precious metal. But do not forget that your jewellery will not come back to you in the same form as you put them in – you get the returns in the form of money or gold coins and bars that you can later encash.
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