The cabinet has approved the gold monetisation scheme and gold bond scheme, which were announced by the finance minister in his Budget 2015-16.
As India is the biggest importer of gold, the two schemes aim to curb the metal’s demand which is putting pressure on India’s current account. After the cabinet meeting, Arun Jaitley said, "It is safer and economically more stable to go under both these schemes". He also added that “Now, people can buy gold bonds instead of physical gold”.
Gold Bond Scheme
These bonds will be issued by the Reserve Bank of India for denominations of 2, 5 and 10 grams of gold. The maximum limit for investments in these bonds is 500 grams per person per year. The tenure of the gold bond will range from 5 to 7 years to protect the investors from short-term volatility faced by the metal. These bonds will earn interest during the tenure which will be decided keeping the market rate in view. These bonds could be redeemed at banks, non-banking financial companies (NBFCs) and post offices at the face value of gold at the end of the tenure.
Gold Monetization Scheme
Under the scheme, the depositor will earn interest on their gold accounts. This scheme especially targets people holding idle gold. Under the scheme, they can deposit their gold into banks for short-, medium- or long-term and earn interest over it.
The finance minister has also said that it is not a black money immunity scheme therefore normal taxation laws will be applicable on this scheme. Further, capital gains tax will be levied as per the norms applicable on holding physical gold. However, Shaktikanta Das, secretary, department of economic affairs, in the ministry of finance said “The department of revenue has agreed to consider amending the income tax act for providing indexation benefits to long-term capital gains arising on transfer of bond and for exemption for capital gains arising on redemption of the bonds in the next budget”.