Most Indians don’t invest in gold. However, irrespective of the gold rate in the market, they buy gold ornaments every year for consumption as for many centuries it has been an important part of their traditions and customs. It is also one of the reasons why they prefer keeping gold ornaments in the confines of their homes and bank lockers to invest it. To monetize the gold lying in closed lockers and other hidden spaces, the government introduced Gold Monetisation Scheme (GMS).
The scheme is relatively new and was introduced by the Central Government in the Union Budget 2015-16. The scheme refers to the process wherein an interested customer deposits physical gold in any form with a designated bank branch which is then melted into gold bars and further lent to borrowers such as jewellers. To take part in the process, customer needs to open a gold savings account, which works like any other savings bank account but is carried out in terms of gold instead of money.
People usually keep their gold in their homes without any security or store it in bank lockers and pay a maintenance fee. Now, what if we tell you that you can earn on the gold that has been lying like dead and doing nothing for you? Exactly, this is what your scheme is going to do for you. In this scheme, deposit your gold in any physical form and earn interest on it.
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If this scheme interests you, read on a few of its features that make it a great place to store your gold.
1- An Inexpensive way to store your gold
People usually deposit gold in their homes or bank lockers. Either way, they do not gain anything from their deposit. In fact, if they store their gold in bank lockers, they have to pay a maintenance fee for it. This means that you’re spending money to store and keep your gold safe, which is not an attractive proposition. Gold Monetisation Scheme not only offers storage space and security for your gold but also interest, which will keep on accumulating till your deposit matures.
2- Earn on your gold deposit
Storing gold in your home or in bank lockers will not give you any benefit. If you are not comfortable investing in gold, you can deposit it under the Gold Monetisation Scheme and keep earning interest on it till the deposit matures. By selling your ‘idle gold’, you only get on-spot money. On the contrary, depositing your gold in this scheme will not only get you interest amount but also give you an option to pre-withdraw your deposit either in cash or gold. If it seems right, you can also encash the deposit at maturity. This way, you can take benefit from the appreciating gold rate.
3- Deposit gold in any form
You can deposit your gold in any form under the Gold Monetisation Scheme. Be it bars or coins or jewellery, banks will readily accept gold provided it is not encrusted with gemstones or include with other metals.
4- No maximum limit
Minimum gold deposit required to open an account under this scheme is 30 grams. As far as the maximum limit is concerned, there is no limit specified.
5- Flexible tenures
There are three-term deposit plans available under this scheme, which are given as follows:
- Short term bank deposit: 1 to 3 years
- Medium-term government deposit: 5 to 7 years
- Long term government deposit: 12 to 15 years
You can withdraw money before the end of tenure but only after you complete the lock-in period.
6- Attractive rate of interest
A product that usually remains idle in enclosed spaces of homes and lockers if deposited under the scheme will earn you up to 2.50% interest depending on the period of deposit. Short-term bank deposit interest rates are at the disposition of the banks, whereas interest rates for medium and long term government deposit are decided by the Central Government.
The interest rates currently being offered are as follows:
- Short-term rates bank deposit rates at SBI: 0.5% p.a. for 1 year, 0.55% for 2 years, 0.60% for 3 years.
- Medium-term government deposit rates: 2.25% p.a. for 5 to 7 years.
- Long-term government deposit rates: 2.50% p.a. for 12 to 15 years.
7- Tax benefits
Customers making a profit under the Gold Monetisation Scheme do not need to pay capital gains tax. The capital gains are also exempt from wealth tax and income tax.
8- Withdrawal of the deposit
Depositors interested in Short Term Bank Deposit can specify whether they want returns in cash or physical gold. And the choice must be provided at the time of deposit. If you choose to have returned in the form of physical gold, then at the time of maturity, you will get it in the form of gold coins or bars in 995 fineness. You do not get your jewellery back in the form as you had deposited them in. This is because banks with your consent convert the gold you deposit into bars and send it either to the Metals and Minerals Trading Corporation of India (MMTC) for minting India Gold Coins or sell it to jewellers.
9- Varied interest calculation
In Short Term Bank Deposit, the interest is not calculated in money. Instead, it gives you an interest in gold. Hence if the rate of interest is 1% p.a., you get 1 gm on 100 gm. However, in Medium and Long Term Government Deposit, the interest is computed only in money with reference to the value of gold at the time of deposit. Hence, if you had deposited 50 gm of gold amounting to ₹1.5 lakh and the rate of interest rate is 2.5%, you will get ₹3,750/- as interest in a year.
10- Verification of purity
Under the Gold Monetisation Scheme, more than 300 gold purity testing centers have been permitted by the government to verify the purity of gold. To open an account under this scheme, depositors will have to visit the nearest collection and purity testing center for purity and weight test. There you will get a receipt mentioning the quality and purity of the gold to be deposited. This receipt will have to be produced to the bank where you have to deposit gold.