In India, gold has always been a trusted choice for investment. It holds its value even when times are tough, and selling it is usually straightforward. However, buying gold isn’t always easy for everyone due to its cost. To make this easier, many jewellery stores and banks have introduced gold savings schemes.
These plans are designed to help people purchase gold in a more affordable way, often allowing payments to be spread out over time. If you’re considering these options, you might wonder which scheme suits you best.
This blog looks into how gold savings schemes work in India and compares available options. It also explains how these plans make owning gold more convenient and affordable for people.
What is Gold Savings Scheme?
A gold saving scheme is a planned approach to saving for gold over a set period of time. Instead of buying gold all at once, you can make regular contributions, often monthly, which add up to a lump sum that can be used to purchase gold later. This makes it easier to save, as you’re not burdened with a large one-time expense.
These schemes are especially useful for people who have specific goals in mind, like saving for a wedding, festival, or even for future investments. The beauty of a gold saving scheme is that it allows you to accumulate gold without having to worry about price fluctuations. Over time, the money you save can grow into a significant amount, making gold more accessible and affordable. It’s a practical, structured way to work towards a goal, with the added benefit of investing in a valuable asset like gold.
Features & Benefits of Gold Schemes
Gold savings schemes offer a convenient and secure way to invest in gold, with several features that make them appealing for long-term savers.
- The deposit period for these schemes typically lasts between 3 to 5 years, giving you some flexibility in choosing how long you want to commit your investment.
- You can deposit gold in different forms, such as bars, coins, or jewellery, depending on what you have.
- Once the gold is deposited, it undergoes melting, assaying, and minting. After this process, the Indian Government's Nodal Branch will issue a Gold Deposit Certificate within 90 days.
- You can hold up to five certificates under your name, allowing for multiple investments if you wish.
- To begin, the minimum amount of gold required is 500 grams, but there is no set upper limit.
- A single nominee can be added to the deposit for a personal touch.
- The deposit can be transferred through endorsement or delivery, with a formal notice to the Nodal Branch.
- When the term of the scheme ends, you can either take back the equivalent amount of gold or its current market value.
- Once the scheme reaches its maturity, you also have the option to renew it if you choose.
- While you are allowed to withdraw your deposit early, you must wait for at least one year from the start of the term. Keep in mind that early withdrawal may come with a penalty.
- You can also apply for a loan of up to 75% of the gold’s notional value at any SBI branch.
- Another great perk of this scheme is that it offers tax benefits, which apply to Income Tax, Capital Gains Tax, and Wealth Tax.
With these features, the gold savings scheme is a solid option for people looking for a safe and flexible way to save, while enjoying the benefits of gold and its growth potential.
Eligibility Criteria for Gold Savings Scheme
To qualify for a gold savings scheme, you typically need to meet a few basic requirements, although these can vary depending on the scheme:
- You must be living in India.
- If you’re part of a Hindu Undivided Family (HUF), you’re eligible to join.
- The scheme is open to individuals, as well as trusts and companies.
While these are the general guidelines, it's always a good idea to check the specific rules of the gold savings scheme you're interested in, as they may have additional conditions.
Types of Gold Investment Plans in India
When considering investing in gold in India, it's important to understand the different types of gold investment options available. Each investment plan comes with its own set of benefits and risks. Below is a table that outlines these investment types and the key risks associated with them:
| Type of Gold Investment | Risks Involved |
|---|---|
| Physical Gold | Physical gold can be lost or stolen, and there’s always the risk of its purity being questioned. Storing gold securely can be expensive, and it might lose value if damaged or if it’s not in the right form for resale. |
| Digital Gold | Although easy to buy, digital gold comes with the risk of limited regulation. If the platform or the provider faces issues, it could affect your investment, as there may be no clear protection for your holdings. |
| Gold ETFs | The value of gold ETFs is tied to market fluctuations, meaning that the gold price itself could influence the value of your investment. Sudden price changes can lead to unexpected gains or losses. |
| Gold Mutual Funds | Gold mutual funds are impacted by the same market risks as ETFs. Additionally, the management of the fund could also impact returns, as the performance of the fund is reliant on the fund manager's decisions. |
| Sovereign Gold Bonds | These bonds are generally low-risk, but in extreme cases, the risk of a government default exists. Though unlikely, if the Indian government were to face financial instability, the value of these bonds could be compromised. |
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Best Gold Investment Schemes in India
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Gold Monetisation Scheme
The Gold Monetisation Scheme is a way to deposit unused gold and earn interest on it while keeping it safe. You can deposit at least 30 grams of gold in any form, like coins or jewellery, with no upper limit. The idea behind the scheme is to use gold more productively and reduce the need for importing it into the country.
The interest rates are decided by the government. For a Medium-Term Deposit, the rate is 0.25% per year, while for a Long-Term Deposit, it's 2.5% per year. Depositors must be Indian residents, and joint deposits are allowed. Withdrawals can only be made after the lock-in period: 3 years for Medium-Term and 5 years for Long-Term deposits. If you withdraw early, there are penalties based on when you withdraw.
This scheme offers benefits like earning interest on your gold, tax exemptions, and secure storage for your jewellery or coins. It’s a simple way to make your gold work for you instead of letting it sit idle.
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Sovereign Gold Bond Scheme
The Sovereign Gold Bond Scheme allows individuals to invest in gold without actually buying physical gold. Instead of holding gold bars or coins, you buy bonds backed by the government. These bonds are issued by the Reserve Bank of India on behalf of the government and are a safe way to invest in gold.
The bonds come with a fixed interest rate, which is paid every six months. The current rate is usually around 2.5% per year. You can invest in these bonds for a minimum of 1 gram of gold, and there is no maximum limit on how much you can invest. The bonds have a maturity period of 8 years, but you can choose to redeem them after 5 years if needed.
Apart from earning interest, the main advantage of these bonds is that they are tax-efficient. You don't have to pay capital gains tax if you hold the bonds until maturity. There’s also no risk of losing your gold since it's a government-backed scheme.
It’s a good option for people who want to invest in gold, but don’t want to deal with the hassle or risk of storing physical gold. The Sovereign Gold Bond Scheme offers a simple, secure, and tax-friendly way to get exposure to gold’s value over time.
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Indian Gold Coins
Indian Gold Coins are the first government-minted gold coins in India, featuring the Ashok Chakra on one side and Mahatma Gandhi on the other. They are available in 5g, 10g, and 20g, giving people options based on their preferences. Made of 24-carat gold with a purity of 999, these coins are known for their quality and authenticity. They come in tamper-proof packaging and include advanced features to prevent counterfeiting. Certified with a BIS hallmark, they are produced by SPMCIL and can only be purchased through select bank branches by account holders.
Factors To Consider Before Investing in Gold-Saving Schemes
- Set Your Goal: Know why you're investing and make sure the minimum contribution fits your budget.
- Check Discounts and Reputation: While well-known banks or jewellers might offer smaller discounts, research less popular ones that could provide better offers and interest rates.
- Verify Credibility: Always ensure the jeweller or bank is trustworthy before putting your money into any scheme.
- Look at Withdrawal Options: If you need flexibility, go for a scheme that allows early withdrawals without heavy penalties.
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Frequently Asked Questions (FAQs)
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What is the 6-month gold savings plan?
The 6-month gold savings plan lets you save a fixed amount each month for six months. Once the six months are up, you can use the accumulated amount to buy gold jewellery, often with added discounts based on the total savings.
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What does the Government's Gold Savings Program involve?
The Government’s Gold Savings Program, also known as Sovereign Gold Bonds (SGBs), allows people to invest in gold without having to physically own it. The bonds are issued in grams of gold and are managed by the RBI. Investors earn interest twice a year, and the bonds last for eight years, though you can redeem them after five years. You can buy these bonds from approved banks.
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How is the gold's worth determined in these schemes?
The worth of the gold in these schemes is determined by its purity and the market price of gold when the scheme matures. This price is based on the current gold rate, including the RBI’s reference price, the USD-INR exchange rate, and applicable customs duties.
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Are there any limits to how much you can invest in gold savings schemes?
Gold savings schemes typically have a minimum investment requirement of Rs. 1,000, but there’s no maximum limit. However, other schemes like Sovereign Gold Bonds or the Gold Monetisation Scheme may have different conditions.
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Who should think about joining a gold savings scheme?
These schemes are ideal for individuals looking to gradually build up their gold savings without a heavy upfront investment. They are a good choice for those who want stability and moderate growth, whether for short-term goals or long-term savings.
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Which gold savings plan is the best in India?
The best gold savings plan depends on your personal financial goals. It’s important to research and compare options to find the one that fits your needs, whether you’re looking for a safe, long-term investment or more immediate returns.
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Are gold savings plans risky or safe investments?
Gold savings plans are generally low-risk because they offer the potential for steady returns over time. However, it’s still important to evaluate the specific terms and credibility of each plan before committing your money.
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Which gold saving scheme is best for long-term investments?
For long-term investments, the best gold saving scheme depends on your individual objectives. It’s a good idea to compare different plans and choose one that aligns with your financial goals and investment preferences.
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What types of gold can be invested in through these schemes?
Most gold savings plans allow you to invest in units of gold, which are equivalent to a certain amount of physical gold. These schemes typically accept various forms of gold such as coins, bars, biscuits, and jewellery, but each plan may have specific rules regarding what is accepted.
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How do I choose the right gold savings scheme?
The best gold savings scheme for you will depend on factors like your financial goals, the amount you want to invest, and the flexibility offered by the plan. It's important to carefully consider all aspects before making a decision.
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What is the GRT 11-month gold savings plan?
The GRT 11-month plan requires a minimum monthly contribution of Rs. 500 over 11 months. In the 12th month, you can use your accumulated savings to buy jewellery. If you don’t purchase jewellery by the end of the term, you get a full refund.
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Do gold savings plans offer any tax benefits?
Yes, certain gold savings plans offer tax advantages. For instance, the Sovereign Gold Bond scheme is tax-exempt on both the interest income and capital gains. The Gold Monetisation Scheme also provides some tax benefits, making it an attractive option for some investors.
