Friday, November 6, 2015

Launch of gold schemes and Indian gold coin by Govt. of India

Launch of Indian Gold Policy

The Central Government of India with an aim to reduce physical gold demand and luring tonnes of gold from households into the banking system, launched three different schemes namely Gold Monetisation Scheme(GMS), Gold Sovereign Bond Scheme and the Gold Coin & Bullion Scheme. It's also aimed at reducing the overall imports of physical gold and is aimed at bringing the current account deficit of the country, as gold is a major part of our import bill. The Prime Minister has also launched today, first ever national Gold coin minted in India with the national emblem of Ashok Chakra engraved in it. The Gold monetization scheme will also replace the existing Gold Deposit Scheme, 1999. with effect from today. However, deposits outstanding under the Gold Deposit Scheme will be allowed to run till maturity unless the depositors prematurely withdraw them, while the Gold monetisation scheme aims to tap part of an estimated 20,000 tonnes of idle gold worth Rs. 5,40,000 crore in family lockers and temples into the banking system.
Gold Monetisation Scheme

The gold monetisation scheme will allow Investors to earn some regular interest on gold while saving carrying costs as well. It is a gold savings account which will earn interest for the gold that an investor deposits in it. Gold can be allowed to be deposited in any physical form - jewellery, coins or bars. This gold will then earn interest based on gold weight and also the appreciation of the metal value. At the time of maturity, gold can be redeemed in the equivalent of 995 fineness gold or Indian rupees as per investor option (the option to be exercised at the time of deposit).
Benefits of Scheme
  • The gold monetisation scheme pays interest for gold jewellery submitted under the scheme. Coins and bars can earn interest apart from the appreciation of value.
  • Redemption is possible in physical gold or in rupees providing further earning oppurtunity.
  • Earnings are exempt from capital gains tax, wealth tax and income tax. There will be no capital gains tax on the appreciation in the value of gold deposited, or on the interest you make from it.
Structure of Scheme
  • The designated banks will accept gold deposits under the Short Term (1-3 years) Bank Deposit as well as Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes.
  • Minimum/ maximum deposit: 30 grams of 995 finenes in raw gold (bars, coins, jewellery, excluding stones and other metals). There is no maximum limit under the scheme.
  • Resident Indians (Individuals, HUF, Trusts including Mutual Funds/Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations and Companies) can make deposits under the scheme. The opening of gold deposit accounts will be subject to the same rules with regard to customer identification as are applicable to any other deposit account. The designated banks may sell or lend the gold accepted under the short-term bank deposit to MMTC for minting India Gold Coins and to jewellers, or sell it to other designated banks participating in the scheme.
  • Interest payout: Interest on deposits under the scheme will start accruing from the date of conversion of gold deposited into tradable gold bars after refinement or 30 days after the receipt of gold at the CPTC or the bank’s designated branch, as the case may be and whichever is earlier.
  • KYC: Depositors interested in depositing gold under the scheme will be subject to the same KYC norms and identification applicable to opening a bank deposit account.
  • Grievances: Complaints against designated banks regarding any discrepancy in issuance of receipts and deposit certificates, redemption of deposits, payment of interest will be handled first by the bank’s grievance redress process and then by the Reserve Bank’s Banking Ombudsman.
  • Premature withdrawal: Individual banks will determine a provision for premature withdrawal subject to a minimum lock-in period and penalty.
Sovereign Gold Bonds

Under Sovereign Gold Bond Schemes, investors will have the option to buy sovereign gold bonds instead of physical gold. According to RBI, applications for gold bonds will be accepted from November 5 to November 20, 2015, while these bonds will be issued on November 26, 2015.
Sovereign Gold Bond – Highlights
  • Sovereign gold bonds will be issued by the Reserve Bank of India. They will denominated in particular amount of gold and linked to the price of the yellow metal. If the price of gold increases, the value of the bond goes up, benefiting investors.
  • Investors can buy a minimum of 2 units or 2 grams and a maximum at 500 grams per fiscal year. The Reserve Bank has fixed the public issue price at Rs 2,684 per gram for the sovereign gold bonds. This means the minimum investment comes to around Rs 5,400.
  • Investors will get a fixed rate of interest of 2.75 per cent per annum (payable every 6 months) on the initial value of investment. There would also be a commission of 1% on the subscription amount for distribution of bonds.
  • The gold bonds would also be available in demat format, so investors will not have to worry about storage unlike physical gold.
  • The bonds have a maturity period of 8 years, with exit option from the fifth year. Holdings can be redeemed in multiples of one gram. The redemption price will be based on prevailing gold prices.
  • The bonds will be listed on the exchanges so investors may get an option to exit even before five years if volumes are good.
  • Gold bonds will be sold through banks and designated post offices. They can be used as collateral for loans from financial Institutions.
  • TDS (tax deducted on source) is not applicable on the interest component, but interest earned on gold bonds will be added to the income and taxed. Capital gains will be taxed at tax slab if these bonds are sold before 3 years. If sold after 3 years, capital gain tax of 20 per cent with indexation benefits would apply. Indexation is a process by which the cost of acquisition is adjusted against inflation in the value of asset.
  • Gold bonds offer an exposure to gold while also offering interest, a feature that is not present in other avenues like ETFs and gold mutual funds or even physical gold.
  • Investors should keep their asset allocation in mind before putting their money in gold bonds as gold prices have been on a long term decline.
Indian Gold Coin & Bullion Scheme

The Indian Gold Coin is a part of the Indian Gold monetisation program. The coin will be the first ever national gold and will have the national emblem of Ashok Chakra engraved on one side and the face of Mahatma Gandhi on the other side. Initially, the coins will be available in denominations of 5 and 10 grams. A 20 grams bar/bullion will also be available. The Indian Gold Coin is unique in many respects and will carry advanced anti-counterfeit features and tamper-proof packaging that will aid easy recycling.
Indian Gold Coin - Highlights
  • Purity - The Indian gold coin will be of 24 karat purity and 999 fineness.
  • Hallmarked - All coins will be hallmarked as per the BIS standards.
  • Security - The tamperproof packaging and advanced anti-counterfeit features on the coin cover makes it very safe and easily recyclable.
  • Availability - This coin will distributed through designated & recognised MMTC outlets