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Thursday, August 25, 2011

Gold Deposit Scheme For HNI, Trusts and Companies

India is the largest consumer of gold in the world and accounts for around 20 % of the world demand.
Gold had always been perceived as the best friend during the crisis and meteoric rise in gold prices during the past several years has portrayed gold as one of the most sought-after investment options.
But majority of gold in India is in the form of jewelry which is often unaccounted and undeclared.
To bring this idle gold into the mainstream gold deposit scheme was conceived.
Modus-Operendi of the Scheme
Designated banks accept gold from investors to melt and turn into pure gold bars, and interest bearing certificates are issued to investors in-lieu of the gold deposited. These certificates can be redeemed in gold or cash on the maturity date.
Interest paid is nominal and ranges between .75 to 1% only.
Such schemes accept at least 500 gm gold or more (no upper limits) thus suitable for HNI’s, affluent HUF's, companies and trusts only.
Presently SBI is offering the gold scheme.
Advantages:
·         Freedom from the risks of storing physical gold like larceny or robbery
·         Though nominal but Interest is receivable on the idle gold along with the appreciation(if happens)
·         Locker or safe custody charges are saved
·         Rupee loan against the bonds can be availed
·         The biggest advantage is Income Tax, Wealth Tax and Capital Gain Tax are exempted
Disadvantages
·         In case of gold jewelry value addition (cost of making ornaments) is lost which may be significant in case of designer ornaments
·         If the bond issuing agency becomes the bankrupt investment shall be jeopardized (Though bonds come with a forward cover from the central bank)

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