We Indians are crazy about gold and golden ornaments. Most of us have ancestral gold jewellery; however it is mainly used in traditional functions such as marriages,poojas, etc. A research of Government states that we have over 20,000 tonnes of gold but this is neither traded not monetized. This brings a huge pressure on gold imports of India due to its ever-growing demand. Hence, to channelize the gold held by individuals and also to reduce the burden of gold import, our Union Finance Minister, Mr. Arun Jaitley announced a new gold scheme in this Budget 2015-16. This scheme is referred as “Gold Monetization Scheme”.
What is “Gold Monetization Scheme”?
It is a scheme governed by Central Government through which gold depositors can earn interest on the basis of investment made in gold savings account.
How this scheme operates?
“Gold Monetization Scheme” operates in following steps-
- Deposit of gold at purity testing centre- Customer is required to deposit his gold at gold purity testing centre. Such centres are organized by Government itself. On deposition, it will issue a certificate of such gold deposit to the customer.
- Opening Gold savings account- Customer is required to produce certificate to the bank. Then bank will open customer’s “Gold savings account” and credit equal quantity of gold as mentioned in certificate.
- Interest on deposits- Bank will pay interest on gold deposits made by customer. Rate of interest will be decided by bank. The main advantage here is both Principal deposit and Interest accrued will be valued in terms of gold. E.g. If a customer deposits 100 gms of Gold and where rate of interest is 3%, then he will get 103 gms (including interest) after a year.
- Period of deposit- The period of deposit will be minimum 1 year. However the maturity period can be extended in multiple of 1 year. Customer can break the deposit within lock-in-period like bank fixed deposits.
- Maturity proceeds- Customer has option while receiving maturity proceeds of gold deposit. He can redeem it either in cash or in the form of gold. However such declaration is required to be given by him at the time of making deposit.
Taxation of Gold Monetization Scheme-
No capital gain will arise on maturity of deposit. Hence, the proceeds of gold deposits are not taxable. In addition to this, interest accrued from gold deposits will also not be taxed. Considering these tax exemptions, Gold Monetization Scheme seems to be a good investment plan for taxpayers.