Here is all you need to know about the Gold Deposit Scheme
The Gold Monetization Scheme (GMS) modifies the ‘Gold Metal Loan Scheme (GML) and ‘Gold Deposit Scheme’ (GDS). This scheme allows you to invest your gold for a period ranging from 1 to 15 years. It functions like a fixed deposit, wherein the deposited gold helps you earn interest and enjoy tax benefits. It is a viable option for investors who intend to multiply their wealth with the help of their gold assets.
Here are some essential details about the GMS that you should know:
Particulars |
Details |
Types of GMS |
|
Tenure |
|
Interest Rate |
|
Repayment on Maturity |
The principal and interest amount is repaid in the form of gold or cash, depending on the investor’s choice |
Joint Ownership |
2 or more individuals can jointly own a deposit account under this scheme |
Renewal |
Can be done on maturity |
Minimum Deposit |
At least 10 grams of raw gold |
Features and Benefits of the Gold Deposit Scheme
Additional Source of Income
Depositors earn interest on gold deposits, providing an additional income source and making the scheme financially attractive
Safekeeping of Gold
The scheme ensures protected vault storage for deposited gold, offering a secure alternative to traditional storage methods
Transparency
You can enjoy complete procedural transparency and be assured of zero hidden charges when opting for a GMS
Financial Inclusion
The scheme provides a secure and interest-bearing avenue for individuals to convert their physical gold into profitable financial instruments
Gold Assets Mobilisation
The scheme aims to mobilise gold held by individual households across India. It helps unlock the intrinsic value of these assets and put them to productive use within the financial system.
Tax Exemption
Earnings generated by the Gold Monetization Scheme are exempt from income tax under Section 10(15)(vi) of the Income Tax Act, 1961 by the Finance Act 1999. Furthermore, you can claim deductions on capital gains tax under Section 2(14)(vi) of the Income Tax Act, 1961, as amended by the Finance Act, 1999.
Flexible Redemption
At the time of deposit, you can choose to redeem the deposit’s principal in physical gold or equivalent cash
Premature Withdrawal
Premature withdrawal is allowed only after the lock-in period is complete and comes with a predetermined penalty chargeThe Gold Monetization Scheme offers various types of gold deposits, each with distinct features regarding duration, lock-in periods, interest rates, and interest payment frequencies. Below is a detailed overview:
Short Term Bank Deposit (STBD)
Duration: 1-3 years
Minimum Lock-in Period: As determined by banks
Applicable Interest Rate: As determined by banks
Periodicity of Interest Payment: As determined by banks
Medium Term Government Deposit (MTGD)
Duration: 5-7 years
Minimum Lock-in Period: 3 years
Applicable Interest Rate: 2.25% per annum
Periodicity of Interest Payment: Simple interest paid annually or cumulative interest at the time of maturity, compounded annually.
Long Term Government Deposit (LTGD)
Duration: 12-15 years
Minimum Lock-in Period: 5 years
Applicable Interest Rate: 2.50% per annum
Periodicity of Interest Payment: Simple interest paid annually or cumulative interest at the time of maturity, compounded annually.
This scheme provides flexibility in terms of deposit types, catering to different investment horizons and interest preferences.
To be eligible for this scheme, you are required to fulfil the following requirements:
You must be residing in India
You must belong to one of the following categories:
Individuals (with or without co-applicants)
Hindu Undivided Family (HUF)
Companies
Trusts
Proprietorship and partnership firms
Charitable institutions
Central or state government
Any entity owned by the state or central government
You must make a minimum deposit of 10 grams of raw gold
Your gold must be BIS certified and evaluated at authorised Collection and Purity Testing Centres (CPTC)
FAQs On Gold Deposit Scheme
What is the interest rate on gold deposits?
The annual gold deposit interest rate for short-term schemes is determined by banks and usually ranges from 0.50% to 0.60%. Meanwhile, the rate of interest for medium and long-term deposits ranges between 2.25% and 2.50% p.a. This is as of 9th February 2024.
What is the minimum investment in a Gold Deposit Scheme?
The minimum investment required for a Gold Deposit Scheme is 10 grams of raw gold.
In what form will a depositor get back their gold on maturity?
On maturity, you can redeem your deposit in the form of physical gold or cash.
How will the principal and interest be denominated at the time of redemption?
The principal and interest of your Gold Deposit Scheme are denominated in gold and Indian rupees, respectively.
Can I withdraw the deposit prematurely?
Yes, you may be able to withdraw your deposit prematurely from a Gold Monetization Scheme. For medium-term deposits, you can make premature withdrawals after the completion of a 3-year lock-in period. Meanwhile, for long-term deposits, the lock-in period is set to 5 years. In addition, there may be penalties or charges levied on early withdrawal, which leads to an overall reduction in the total interest receivable.
What is the minimum and maximum tenure for the deposit?
The tenure of gold deposits usually ranges between 1 and 15 years. However, this may differ from one scheme to another.
When does the bank issue the Gold Deposit Certificate to the customer?
Once you have deposited your gold with the bank and 30 days have passed, a digital system-generated Gold Deposit Certificate is moved to a secure platform. The bank develops this copy on behalf of the government and sends it to you.
What are the RBI rules for the gold scheme?
RBI has issued certain guidelines regarding the purity of the gold, the maturity period, and the interest rates offered. To know more about these in detail, check out the gold scheme guidelines issued by the Reserve Bank of India.
What happens to your gold jewellery in this scheme?
The gold jewellery undergoes a melting process and is transformed into bars with a fineness of 995. The weight, measured in 995 fineness, is regarded as the ultimate quantity credited to the customer's gold deposit account.
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