PM Modi launches gold schemes; coin with Ashok Chakra, Gandhi image

Should you go for them?

The gold monetisation scheme (GMS), launched on November 5 by the Prime Minister, is an addition to the list, potentially creating a win-win situation for all the stakeholders and can be immensely beneficial for the economy in various ways. A large part of this mounting demand for gold was met by burgeoning gold imports. India consumes about 850-900 tonnes of gold annually.

The bond scheme targets gold investors. This reflected the close association between movements in prices of gold and gold imports. At the time of selling, customers can earn returns as per the current price of gold. With the objective to bring down physical buying of gold, the Sovereign Gold Bonds Scheme was launched that offers 2.75 percent annual interest rate.

Other details: The investors in the gold bond scheme will be issued a stock/holding certificate.

Gold monetisation scheme being implemented through banks, is aimed at mobilising idle gold in the system and use that gold for productive goal and avoid imports. After doing an XRF (x-ray fluorescence) and a fire assay test, you will be told the result. “There is also lack of clarity on the tax treatment, on the conversion of physical gold into the gold deposit scheme”. Interest rate on medium and long-term government deposit is 2.25 per cent and 2.20 per cent, respectively.

Ashok Minawala, director, All India Gems & Jewellery Trade Federation, said, “For GMS, the government has presently proposed around 125 of 350 Hallmarking centres to be the collection centres as well as assaying centres in only 14 cities of the country, while the need is to be present in over 300 cities”.

Gold Monetisation Scheme requires melting of gold ornaments before depositing them in banks. But don’t worry; interest income from this deposit will be exempt from tax. There will also be no capital gains tax on the appreciation in the price of gold.

Investment in traditional form of gold seems to be passe.

Your gold deposit has a minimum lock-in period. On premature withdrawal, the terms and conditions should be liberal and at least on par with those existing for FD schemes in banks. These bonds can also be used as collateral for loans. The commission for distribution shall be paid at the rate of one per cent of the subscription amount.

The interest on the bond will be paid on investment value.

The interest rate is a welcome incentive, but should not be so lavish that it leads to an increase in gold demand. Redemption of the Gold Saving account is also possible.

More importantly, savings accumulated in the form of gold by households can be channelised to productive use, improving savings-investment linkages, thus sprouting potential for the faster economic growth.

“This places it at an unfair disadvantage against mutual funds, However, when compared with gold ETF’s, it may be considered a better investment as expense ratio is charged on ETFs but not on sovereign gold bonds”, officials said.

The applications for purchase of Gold Bonds will be accepted by the Reserve Bank of India (RBI) from November 5, 2015 to November 20, 2015 and the bond will be issued to applicants on November 26, 2015. The minimum investment in the bond shall be 2 grams.

Officials said they would watch how the market was reacting to the bonds.

I think 2.75 percent interest on Sovereign Gold Bond Scheme is very good as it not only has the benefit of gold price rise but also provides hedge against inflation.

When you buy gold jewellery you end up paying for making charges. If you intend to hold these electronically, then, you may need a demat account, for which you may have to bear the cost.