Finding ways to save tax? How would it sound if the gold in your cupboard starts to generate income which is not taxable? Surprised? Yes, it is possible if you put it into the safe custody of banks under the Gold Monetisation Scheme. Gold Monetisation Scheme is the revamped version of the Gold Deposit Scheme and the Gold Metal Loan Scheme which enables you to generate interest income on your idle gold and put it to productive use. Also, the interest and capital gain are not chargeable to tax. Therefore, knowing the scheme would pay better. Refer this guide of H&R Block to learn about it.
Gold Monetisation Scheme is similar to a Savings Bank Account Scheme where a resident individual can deposit his gold in the metal account and earn interest on it. The gold can be in any form be it jewellery, bars, coins or bullion. But it might be possible that the gold on maturity may not be received in its original form. The deposit of gold is denominated in grams. The rate of interest for such deposits is determined by the designated banks which are authorised to implement the scheme by the Reserve Bank of India.
The interest to be paid to the customer on his gold deposits is ‘valued’ in gold only for short-term deposits. However, this interest is paid to the customer in cash itself. The customer has the option to withdraw only the principal amount in the form of gold or cash at his choice which has to be defined at the time of making the deposit.
For example: If Mr A deposits 100gms of gold @ 1% p.a. The maturity proceeds would be valued at 101gms of gold. However, the customer would be paid 100gms in the form of gold and the 1gm value of gold would be paid in cash. The customer has the option to redeem the whole 101 gms in cash.
The minimum tenure to make gold deposits is 1 year. And the minimum deposit is set to be just 30 gms to encourage even the small deposits.
The tenure for the Gold Monetisation Scheme is divided into the 3 categories:
However, the deposit can be withdrawn at any time during the year at certain pre-mature penalties.
The capital gain made by appreciation in gold price at the time of maturity is not chargeable to tax. Also, the interest income on such gold deposits is exempt from tax as per the provisions of the Income Tax Act. Hence, the income on such metal account does not attract any tax.
Ans: No. The gold deposited is melted and assayed to be traded in the form bars and coins. At maturity or withdrawal you might get coins or bars at 995 purity level.
Ans: The gold is taken for purity testing and deposited at the Collection and Purity Testing Centres (CPTC) authorised by the Government. The CPTC issues a certificate which is then needed to be taken to the bank’s branch. The bank then credits the gold in the customer’s Metal account.
Ans: No. The interest on short-term deposit is only valued in gold. However, it is paid to the customer in INR itself.
Ans: At the time of maturity, the price would be determined based upon the credits or grams of gold in the customer’s metal account at the rate of gold prevailing on the day of maturity.
Ans: The interest will start to accrue after 30 days from the date of receipt of gold at CPTC as the refinement and conversion takes time for gold to convert it into tradable form.
Gold Monetisation Scheme is a great tax saving opportunity for persons holding idle gold in their inventory. The scheme enables such individuals and eligible persons to earn tax free interest and capital gains. And as rightly said, an investment in knowledge pays the best interest. Therefore, knowing about the scheme would anyways pay better.Gold Monetisation Scheme is a great tax saving opportunity for persons holding idle gold in their inventory. The scheme enables such individuals and eligible persons to earn tax free interest and capital gains. And as rightly said, an investment in knowledge pays the best interest. Therefore, knowing about the scheme would anyways pay better.