Generally, you keep your gold at home without any security or pay a monthly charge to put it in a bank locker. However, a Gold Monetisation Scheme works the same way as a gold savings account. The difference is that when you place your gold in any form in an account under the Gold Monetisation Scheme, you earn interest as the price of gold rises in the market.
Gold Monetisation Scheme - Overview
The Gold Monetisation Scheme is a relatively new initiative launched by the Central Government in 2015-16. The goal is to protect the gold in Indian households while also using it. The overarching goal is to reduce the country's gold imports by reducing domestic demand. India is the world's second-largest gold consumer.
Characteristics of the Gold Monetisation Scheme
1. Deposit flexibility
It allows you to deposit your gold in any form. It can be in gold bars, cash, or even jewellery. Gold jewellery adorned with jewels, on the other hand, cannot be deposited in this plan.
2. Deposit quantity flexibility
The minimum deposit is 30 grams of any purity in a gold monetization plan. There is no such thing as a maximum limit.
3. A tenure that is convenient for you
Under the Gold Monetisation Scheme, there are three term-deposit options:
- 1 to 3 years is the short-term option
- 5 to 7 years in the medium term option
- 12 to 15 years in the long term option
4. Withdrawal of Deposit
If you want to withdraw the deposit before the end of the tenure, you can do so by paying a minor penalty.
5. Attractive interest rates
The precious metal can earn you anywhere from 0.5 percent to 2.5 percent per year, depending on the deposit duration, for a product that generally sits unused in homes and lockers.
6. Calculating interest in Gold Monetisation Scheme
The Gold Monetisation Scheme's short-term bank deposit does not pay interest in the form of money. It provides you gold in grams as a type of interest. So, if the interest rate is 1% each year, you will get 1 gram on 100 grams.
7. Withdrawal of the deposit
For short-term plans, you can decide whether you want your returns in the form of money or actual gold when you deposit. If you prefer to have your returns delivered in physical gold, you will receive 995 fine gold coins or bars.
8. Verification of purity
To test and verify the purity of the gold that is being deposited, over 330 Collection and Purity Testing Centres have been licensed around the country.
Benefits of Gold Monetisation Scheme
Profits earned through the gold monetization plan are not subject to capital gains tax. Capital gains are excluded from both wealth and income taxes.
The Gold Monetisation Scheme provides a fantastic chance for large Indian families to earn from obsolete jewellery stashed in bank vaults and safe deposit boxes. Companies can use this strategy, trusts, jewellers, and individuals with a gold horde to monetize their precious metals. But keep in mind that your jewellery will not be returned to you in the same condition as when you handed it in; instead, you will receive money or gold coins and bars that you can cash in later.
FAQs on Gold Monetisation Scheme
Q.1. How safe is the Gold Monetisation Scheme?
This implies that you are spending money to keep your gold safe. When the plan matures, the Gold Monetisation Scheme secures your gold by holding it and repaying it to you in the form of money or actual gold.
Q.2. Who is eligible to make a gold deposit under the Gold Monetisation Scheme?
The Gold Monetisation Scheme allows investors to deposit gold for short, medium, and long periods. For example, an investor would be able to deposit gold in Short Term Bank Deposits (SRBD) and Medium and Long Term Government Deposits under the scheme (MLTGD). A Short Term Bank Deposit has a term of one to three years.
Q.3. Which bank provides Gold Monetisation Scheme Plans?
Short Term (1-3 years), Medium (5-7 years), and Long (12-15 years) Term Bank Deposits (STBD) are accepted by the approved institutions (ICICI Bank, Corporation Bank/Union Bank of India, Indian Overseas Bank, Punjab National Bank, State Bank of India, HDFC Bank, Yes Bank, Dena Bank/Bank of Baroda).
Q.4. What is the difference between a Gold Monetisation Scheme Program and a sovereign gold bond?
Individuals can receive tax-free interest by depositing a minimum of 30-gram gold bullion or jewellery with the bank for a year under the Gold Monetisation Scheme. Gold bonds will be issued in rupees and denominated in 5 grams, 10 grams, 50 grams, and 100 grams of gold under the sovereign bond program.