PM's Diwali gifts: How to secure your gold through Centre's gold coin, monetisation and bond schemes

As a gift in the festive season, Prime Minister Narendra Modi on Thursday launched India's first official gold coin, a gold monetization and a gold bond scheme. Calling gold the power of women, the Prime Minister said, "women usually don't own anything, house, car usually named after their husband or son, but Gold is a matter of their strength for them."

Here are the details of the gold schemes that have been launched by the Centre:

Sovereign Gold Bond

The Sovereign gold bond scheme is expected to offer the same benefits as physical gold. They can be used as collateral for loans and can be sold or traded on stock exchanges. The bonds will be available both in demat and paper form. The tenor of the bond is for a minimum of 8 years with an option to exit in 5th, 6th and 7th years. Denominated in grams of gold, the Bonds are issued by the Reserve Bank of India on behalf of the Government of India

They will carry sovereign guarantee both on the capital invested and the interest.

The benefit of buying SGB is that the quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption/ premature redemption. The risks and costs of storage are eliminated by storing SGBs as investors are assured of the market value of gold at the time of maturity and periodical interest.

SGB is free from issues like making charges and purity in the case of gold in jewellery form. The bonds are held in the books of the RBI or in demat form eliminating risk of loss of scrip etc. Howeber, there might be a risk of capital loss if the market price of gold declines. Though the investor does not lose in terms of the units of gold which he has paid for.

The Bonds are issued in denominations of one gram of gold and in multiples thereof. Minimum investment in the Bond shall be two grams with a maximum buying limit of 500 grams per person per fiscal year (April – March). In case of joint holding, the limit applies to the first applicant.

Gold Monetisation scheme

Gold lying in the locker appreciates in value if gold price goes up but it doesn't pay you a regular interest or dividend. Infact, one incurs carrying costs on it in the form of bank locker charges. The monetisation scheme allows individuals to earn regular interest on gold and save the carrying costs as well.

It is a gold savings account which will earn interest for the gold that is deposited in it. Your gold can 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. You get back your gold in the equivalent of 995 fineness gold or Indian rupees as you desire (the option to be exercised at the time of deposit).

The main benefits of using the scheme are that it earns interest for the gold jewellery lying in the locker. Broken jewellery or jewellery that is not being used can earn interest in gold.

Coins and bars can earn interest apart from the appreciation of value and the gold will be securely maintained by the bank. Redemption is possible in physical gold or rupees hence giving the gold purchase further earning opportunity.

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 from it.

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.

Indian Gold Coin

The Indian Gold Coin is the first ever national gold coin and is a part of Indian Gold monetisation program. It 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.

The Indian gold coin will be of 24 karat purity and 999 fineness. All coins will be hallmarked as per the BIS standards. The tamperproof packaging and advanced anti-counterfeit features on the coin cover make it very safe and easily recyclable. The coins will distributed through designated & recognised MMTC outlets.