The Indian mindset of investment has revolved primarily around investment in tangible assets, namely, gold and real-estate.
The Indian mindset of investment has revolved primarily around investment in tangible assets, namely, gold and real-estate. It is estimated that Indian households and other trusts hold gold close to 20,000 tonnes, which are primarily non-productive by nature. To ameliorate the situation of increasing idle investments in gold, the Union government in September 2015 introduced the Gold Monetisation Scheme, which was followed with directions issued by the RBI in October 2015. Especially for the elderly, this scheme can come in handy.
How does it work The household that intends to avail the benefits under the scheme is required to open a gold savings account with a bank. The gold so deposited is converted into monetary terms post checking by a notified Assaying Centre and a deposit certificate issued to the depositor. The gold could be deposited for 1-3 years in the short term and for 12-15 years in the long term. The regulations mandate that the minimum deposit of gold at any one time shall be 30 grams of raw gold (bars, coins, jewellery excluding stones and other metals). Further, there is no maximum limit for deposit under the scheme.
The account is denominated in grams of gold. If one opens a gold savings account and deposits 100 grams of gold in such an account, assuming that the interest rate is 2 per cent per annum, he would on maturity of a year get 102 grams of gold at maturity or its equivalent value.
Recent Amendments As per the provisions in the latest budget, deposit certificates issued under the said scheme would not be regarded a ‘capital asset’, so any gains from the transfer of the deposit certificates would be exempt from tax. Further, the interest arising on such deposit certificate will also be exempt from tax.
(Sherry Samuel Oommen is a practising lawyer who specialises in tax and corporate laws)
