Earn more from your gold GOLD MONETIZATION SCHEME

India’s love for gold has been prevalent for centuries. No celebration is complete without adding a touch of gold in it, be it in any form.

This love for gold by our ancestors and us has resulted in a lot of reserved gold lying idle in homes. Either it was passed on through generations or it was bought. In either of the case the gold is just lying idle after investment.

Of course, the investment brings capital appreciation but it comes with an added cost of storage and the risk of theft or loss. But what if we could earn additional income from the idle gold along with capital appreciation and that too without the cost and risk?

The Gold Monetization Scheme introduced by the Government of India does just that. It helps you earn more from the gold you already have, without further investment.

What is Gold Monetization Scheme?

The Gold Monetization Scheme is like a savings account for gold. Here you deposit your gold with the bank and the corresponding value of gold gets credited to your account. On this account you also earn interest along with the capital appreciation that comes with the change in price of gold.

Features of Gold Monetization Scheme

Let us take a look at the features to learn more about the scheme.

●       Flexibility in deposit

The Gold Monetization Scheme gives you the flexibility to deposit gold in any form, be it gold bars, coins or jewellery. Every kind of gold is accepted in the scheme. However, gold jewellery studded with stones or gems are not accepted.

●       Deposit limit

The minimum amount of gold that you can deposit in the Gold Monetization Scheme is 30 grams. There is no maximum limit for the deposit. You can deposit as much gold as you deem fit.

●       Purity testing

The gold deposited by you first goes through a purity test. There are over 300 Purity Test Centres certified by the government that are eligible to conduct the purity test. Once the test is complete a certificate is issued stating the purity of the gold deposited.

The purity test is a mandatory step in the Gold Monetization Scheme. The gold that you intend to deposit is first tested for purity at the Purity Test Center.

Here, the gold is first scanned to give an estimate of purity. After the scan is complete the depositor has the option whether to take it to the next step, which is melting of gold. Here the gold is melted to remove impurities and calculate the exact weight and purity.

Once the gold has been melted the depositor still has the option whether to deposit it or not. He can collect his certificate and the gold after paying the charges of the test. But if you decide to deposit, these charges will be borne by the bank. The only catch here is that it will lose the form it was brought in, as it has been melted.

●       Bank deposit

After receiving the purity certificate, the depositor can take the certificate to any notified bank that supports the Gold Monetization Scheme. Upon receiving the certificate, the bank will open an account called ‘Gold Savings Account’ in which the amount of gold reflecting in your certificate will be credited.

Thus, you will be holding the exact amount of gold that you were holding previously but in a paperless form.

●       Gold Monetization Scheme Interest Rate

The gold invested in the Gold Monetization Scheme earns you an additional annual interest of up to 2.5% p.a. depending upon the term of deposit. Therefore, along with the capital appreciation in gold, you also earn additional interest income.

●       Lock-in-period

The gold can be deposited in the Gold Monetization Scheme for a period ranging from 1 year to 15 years. It is divided into three plans:

  • Short term plan – 1 to 3 years
  • Medium term plan – 5 to 7 years
  • Long term plan- 12 to 15 years

●       Maturity option

At the end of the term the depositor can redeem the value either in gold or cash. The decision to choose between gold or cash has to be taken at the time of deposit and cannot be reversed.

If you choose gold then at the maturity you will receive pure gold bars or coins corresponding to the value in your gold savings account. If you had deposited jewellery, you will not get the jewellery back.

If you choose cash then you will receive the value of gold prevalent on the date of maturity.

You can withdraw before the end of the term i.e. premature withdrawal is permitted. However, in case of premature withdrawal it is at the option of the bank how they want to pay. Banks can either pay in cash or gold irrespective of what you had chosen at the time of deposit.

●       Tax exemption

The capital gain and the interest earned at the end of maturity is exempt from tax. No income tax will be levied on withdrawal.

These were some of the features of the Gold Monetization Scheme. Now let us have a look at the benefits of the scheme to understand how exactly is this scheme beneficial.

Read7 Ways to buy Gold

Benefits of Gold Monetization Scheme

Gold Monetisation Scheme Interest Rate

1.      Additional interest income:

Along with capital appreciation in the price of gold, the Gold Monetization Scheme lets you earn an added interest of up to 2.5% p.a. over and above the increased price of gold.

2.      Save storage cost:

Keeping idle gold in your home adds to the cost of storing it. Since it is a precious metal it needs to be stored cautiously. Usually people keep it in lockers or so for which some maintenance charges are required to be paid. These maintenance charges decrease your net earnings.

3.      No risk:

Keeping the gold at home is always a risk. SInce gold is of high worth there is an inherent risk of theft or loss while storing it physically. With Gold Monetization Scheme your gold is safe and secure and that too without an added cost.

4.      Capital appreciation:

The price of gold is dependent on the market forces of supply and demand. And since the demand has always been high than the supply, there is usually an increase in the price of gold.

With the Gold Monetization Scheme, you get to enjoy the benefit of the increased prices of gold (capital appreciation) just like you would with physical gold but without any added cost.

5.      Tax Benefit:

Traditionally people sell gold to get cash on which capital gain tax is charged since it a capital asset. But if you invest in Gold Monetization Scheme you get an exemption from tax since gold invested in Gold Monetization Scheme is kept out of the definition of capital asset in the Income Tax Act.

Hence, you not only earn interest and capital appreciation but also save tax on the same which you would have to pay had you been selling it in the market.

This is pretty much about the Gold Monetization Scheme. In our opinion it is a great scheme to earn additional income from the idle gold lying in your home. So don’t think anymore and make the most of this amazing scheme.

This article is a Guest Post by Karan Batra from charteredclub.com

If you have any views & questions about Gold Monetization Scheme feel free to add in the comment section.

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5 COMMENTS

  1. I have big doubt this type scheme become successful for common.
    Gold is psychological investment not for gains.
    Plus you are asking to melt them , who will give his treasured gold .
    Only I assume people with useless gold bar are the target , don’t know how cash converted gold bars banks are willing to take .

  2. I see advantages of the scheme. But there are hardly any banks and branches where the scheme can be availed of. Without a nearby bank branch and a nearby assaying centre, the scheme is very difficult to use. If you know which banks and which branches in Ahmedabad have implemented the gold monetization scheme, please let me know.

  3. This is really a good scheme.proper marketing by the government and professionals like you are needed.you have done a great service explaining the merits of the scheme.this avoids keeping physical gold which is a great relief.Decent appreciation..tax benefits …what more do you need?

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