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Gold Monetisation Scheme: Benefits, Eligibility & Procedure - A Comprehensive Guide

Team AckoFeb 16, 2024

Gold has long been a symbol of wealth and prosperity in India, with its significance deeply rooted in the cultural fabric of the nation. Recognizing the vast potential locked within the idle gold reserves of individuals and institutions, the Government of India introduced the Gold Monetisation Scheme (GMS).

This initiative presents a unique opportunity for individuals and organisations to not only unlock the value of their precious metal but also contribute to the nation's economic growth. In this comprehensive guide, we will delve into the intricacies of the Gold Monetisation Scheme India, exploring its benefits, eligibility criteria, procedure, and frequently asked questions.

Contents

What is the Gold Monetisation Scheme?
How does the Gold Monetisation Scheme work?
Eligibility criteria for participating in the scheme
Benefits of the Gold Monetisation Scheme
Procedure to Participate in the Gold Monetisation Scheme
Different types of gold items accepted under the scheme
Calculation of interest earned on deposited gold
Safety and security measures for deposited gold
How to redeem or withdraw gold from the scheme
Tax implications and exemptions
Comparison with traditional gold investment options
Potential impact of the Gold Monetisation Scheme
Challenges and criticisms of the scheme
Wrapping up
Frequently Asked Questions (FAQs)

What is the Gold Monetisation Scheme?

The Gold Monetisation Scheme India is a government initiative aimed at encouraging individuals and institutions to deposit their idle gold reserves with banks and earn interest on them. The scheme was launched to mobilise the vast amounts of gold lying dormant in households and vaults across the country, thus reducing India's reliance on imported gold and using its existing resources more effectively.

How does the Gold Monetisation Scheme work?

Under the Gold Monetisation Scheme India, individuals and institutions can deposit their gold with banks designated as Gold Collection and Purity Testing Centers (CPTCs). The deposited gold is assessed for purity, melted, and converted into tradable gold bars. The depositor receives a certificate of deposit (CoD) stating the quantity and purity of the deposited gold. The CoD can then be used as collateral or redeemed for the equivalent value in cash or gold at the end of the tenure.

Eligibility criteria for participating in the scheme

The Gold Monetisation Scheme India is open to all resident Indians, Hindu Undivided Families (HUFs), trusts, and charitable institutions. The scheme accepts gold in various forms, including jewellery, coins, bars, and gold flakes. Non-resident Indians (NRIs) and entities such as banks, mutual funds, and exchange-traded funds (ETFs) are not eligible to participate.

Benefits of the Gold Monetisation Scheme

The Gold Monetisation Scheme India offers several benefits to individuals and institutions:

Interest Earnings: Depositors can earn interest on their gold holdings, allowing their idle assets to generate income.
Safety and Security: The scheme ensures the safekeeping of deposited gold through designated banks, offering peace of mind to depositors.
No Capital Gains Tax: The interest earned and the appreciation in the value of gold are exempt from capital gains tax, making it a tax-efficient investment option.
Contribution to the Economy: By depositing gold, individuals and institutions contribute to reducing India's reliance on imported gold, thus strengthening the nation's economy.
Loan Facility: Depositors can avail themselves of loan facilities against their gold deposits, providing them with liquidity during financial emergencies.

Procedure to Participate in the Gold Monetisation Scheme

Participating in the Gold Monetisation Scheme India involves the following steps:

Identification of Gold: Individuals or institutions interested in depositing their gold need to approach a designated bank and get their gold assessed for purity and value.
Opening of Gold Savings Account: Once the gold is verified, a Gold Savings Account is opened for the depositor, and a certificate of deposit (CoD) is issued.
Choice of Deposit Option: Depositors can choose between a short-term deposit (1-3 years) or a medium-to-long-term deposit (5-7 years) based on their investment objectives.
Earning Interest: The gold is deposited with the bank, and the depositor starts earning interest on the deposited gold.
Redemption or Renewal: At the end of the deposit tenure, depositors can either redeem their gold or renew the deposit for further tenure.

Different types of gold items accepted under the scheme

The Gold Monetisation Scheme India accepts various forms of gold, including:

Jewellery: Gold jewellery in any form, such as necklaces, bracelets, earrings, or rings, can be deposited.
Coins: Gold coins issued by the Government of India or any other recognized foreign government are accepted.
Bars: Gold bars of 24-carat purity or gold bars of lesser purity, but meeting the standards set by the Bureau of Indian Standards (BIS), can be deposited.
Gold Flakes: Gold flakes obtained from goldsmiths or refineries can also be deposited.

Calculation of interest earned on deposited gold

The interest earned on deposited gold is calculated based on the weight and purity of the gold. The interest rates may vary depending on the deposit tenure chosen by the depositor. Banks typically offer competitive interest rates, which are subject to periodic revisions. The interest accrued is either paid out periodically or added to the principal amount.

Safety and security measures for deposited gold

The Gold Monetisation Scheme India ensures the safety and security of the deposited gold through various measures:

Designated Vaults: Banks maintain designated vaults equipped with state-of-the-art security systems to safeguard the deposited gold.
Insurance Coverage: Deposited gold is often insured to protect against loss or damage due to unforeseen circumstances.
Periodic Audits: Regular audits are conducted to verify the existence and purity of the deposited gold, ensuring transparency and accountability.

How to redeem or withdraw gold from the scheme

Depositors have the option to redeem their gold or withdraw it in the form of cash or gold equivalent at the end of the deposit tenure. The redemption process involves the following steps:

Initiating Redemption: Depositors need to approach the designated bank and initiate the redemption process by submitting the Certificate of Deposit.
Assessment of Gold: The bank assesses the gold to ensure it matches the specifications mentioned in the Certificate of Deposit.
Redemption Mode: Depositors can choose to receive the redemption amount either in the form of cash or gold, as per their preference.
Closure of Account: Upon redemption, the Gold Savings Account is closed, and the scheme is terminated.

Tax implications and exemptions

The Gold Monetisation Scheme India offers certain tax benefits and exemptions:

Exemption from Capital Gains Tax: The interest earned on the deposited gold and the appreciation in its value over the deposit tenure are exempt from capital gains tax.
Wealth Tax Exemption: The value of the gold deposited under the scheme is exempt from wealth tax.
Income Tax on Interest: The interest earned on the deposited gold is considered as taxable income and is subject to income tax regulations.

Comparison with traditional gold investment options

The Gold Monetisation Scheme India provides an alternative to traditional gold investment options such as jewellery, coins, and gold bars. Let's compare the scheme with these conventional options:

Aspect	Gold Monetisation Scheme India	Jewellery	Coins	Gold Bars
Interest Earnings	Yes	No	No	No
Safety and Security	High	Moderate	Moderate	High
Liquidity	Moderate	Low	Moderate	High
Capital Gains Tax Exemption	Yes	No	No	No
Wealth Tax Exemption	Yes	No	No	No

Potential impact of the Gold Monetisation Scheme

The Gold Monetisation Scheme India has the potential to bring about several positive impacts:

Reduced Import Dependency: By mobilising the idle gold reserves within the country, the scheme aims to reduce India's dependence on imported gold, thereby conserving foreign exchange.
Increased Liquidity: The scheme provides individuals and institutions with a liquid asset, allowing them to access funds during financial emergencies.
Strengthened Banking System: With a higher inflow of gold deposits, banks can enhance their lending capabilities, leading to increased credit availability for productive purposes.
Boost to the Economy: The scheme contributes to the country's economic growth by channelling the value of idle gold into productive sectors, such as infrastructure development and investment in critical sectors.

Challenges and criticisms of the scheme

While the Gold Monetisation Scheme India presents several advantages, it also faces certain challenges and criticisms:

Lack of Awareness: Many individuals and institutions are still unaware of the scheme and its potential benefits, leading to limited participation.
Complex Procedures: The procedure to participate in the scheme and the documentation requirements can be perceived as complex, deterring some potential depositors.
Low Interest Rates: Some critics argue that the interest rates offered under the scheme may not be attractive enough to incentivize individuals and institutions to deposit their gold.

Wrapping up

The Gold Monetisation Scheme India provides a golden opportunity for individuals and institutions to unlock the value of their idle gold and contribute to the nation's economy. By depositing gold with designated banks, participants can earn interest, enjoy safety and security measures, and avail themselves of liquidity when needed.

The scheme offers tax benefits and exemptions, making it an attractive investment option. However, awareness and ease of procedures need further improvement to realise the scheme's full potential. With the Gold Monetisation Scheme India, individuals and institutions can transform their idle gold reserves into a valuable asset, forging a path towards a more prosperous and economically vibrant India.

Frequently Asked Questions (FAQs)

Here are some common questions about the Gold Monetisation Scheme.

Can I deposit gold jewellery with gemstones under the scheme?

Yes, gold jewellery with gemstones can be deposited under the Gold Monetisation Scheme India. However, the bank will assess the value based on the weight and purity of the gold only.

What is the minimum quantity of gold that can be deposited?

The minimum quantity of gold that can be deposited varies across banks. It is advisable to check with the designated bank for their specific requirements.

Is the interest earned on deposited gold subject to income tax?

Yes, the interest earned on deposited gold is considered as taxable income and is subject to income tax regulations.

Can I withdraw my gold before the end of the deposit tenure?

Yes, premature withdrawal is allowed under certain circumstances, but it may attract penalties or a reduction in interest rates. It is recommended to consult with the bank regarding the terms and conditions of premature withdrawal.

Can NRIs participate in the Gold Monetisation Scheme India?

No, the Gold Monetisation Scheme India is open only to resident Indians, Hindu Undivided Families (HUFs), trusts, and charitable institutions.

Can I avail a loan against my gold deposit?

Yes, banks often offer loan facilities against gold deposits. The loan amount depends on the value and purity of the deposited gold.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.