Gold Investments

Here comes the gold as an asset class, In India gold is always favorite asset class to invest in, Last 2 to 3 year’s gold in different category available for investments in mostly physical Gold to Gold ETF, Gold Funds, Gold bonds & recently govt introduced the Gold monetization scheme, which primary objective to unlock the value of gold lying idle in lockers across the country has also been made fully tax-free. The interest earned on the monetary value of gold and the capital gains earned at the time of redemption will be fully tax free. Let’s take a look at how various gold options that are available stack up on different parameters….

AS GOOD AS GOLD BECOMES EVEN BETTER

PHYSICAL GOLD GOLD ETF GOLD FUNDS GOLD BONDS GOLD MONETISATION SCHEME
INVESTMENT LIMITS No minimum or maximum limit Minimum investment of 1 unit; no upper limit Minimum investment of Rs. 1000; no upper limit Denomination of 2 gm, 5 gm and 10 gm; purchase upper limit is 500 gm Minimum deposit 30 grams of gold; no maximum limit
LIQUUIDITY Can be sold anytime to jewelers but at discount Can be sold on exchange subject to liquidity Can be redeemed at any point of time Can be sold on exchange, but liquidity may be issue Can be sold before maturity at penal interest
TENURE / LOCK IN No No No 8 years with an exit option from the 5th year Varying deposit tenures
EXPENSES Making charges up to 20% of purchase value; Locker charges Expense ratio of around 1%; demat account maintains charges Expense ratio of around 0.5%; apart from 1% on underlying ETF's None None
INTEREST EARNED None None None 2.75% interest on initial value of purchase; payable semi annually 2.25% on medium-term deposits and 2.5% on long term deposit. Bank determined rate for short-term deposit
TAXATION Long- Term capital gains tax at 20% after 3 years; taxed at income slab rate before 3 years Long- Term capital gains tax at 20% (post taxation) after 3 years; taxed at income slab rate before 3 years Long- Term capital gains tax at 20% (post taxation) after 3 years; taxed at income slab rate before 3 years No tax on capital gains at redemption; capital gains upon sale taxable at 20% after 3 years with indexation Both interest income and capital gain are tax free
WHAT WORKS Snob value; allows you to enjoy the gold you own even as it gains in value No worries over safekeeping and purity of gold, allows purchase in very small denominations No worries over safekeeping and purity of gold, allows purchase in very small denominations Enjoys dual benefit of tax-free capital appreciation in gold plus assured interest rate Broken or idle jewelers can earn tax-free interest. Gold securely maintained by bank
WHAT DOES NOT Concerns over safekeeping and purity Insufficient trading volumes lead to disparity in NAV and market price Dual layer cost structure 500 gm limit on purchase per person per year Possibility of getting back lesser gold at maturity owing to impurities