Govt unveils plan to tap household gold

Govt unveils plan to tap household gold

Scheme to provide I-T, wealth tax exemption

Govt unveils plan to tap household gold

The Centre on Tuesday unveiled a draft gold monetisation scheme that provides flexible interest rate and possible exemption from income, wealth and capital gains taxes in order to unlock the value of this dormant asset held by households.

The Finance Ministry has sought comments from stakeholders by June 2.

The key objective of the scheme, announced in the 2015-16 Budget, is to mobilise gold held by households and institutions, and to reduce the import of gold without hurting domestic demand.

To encourage small depositors, the minimum deposit is pegged at 30 grams. Under the scheme, a customer will have to get the jewellery tested at one of the 350 hallmarking centres across the country.

After a preliminary test to find the approximate amount of pure gold, the customer will be asked to fill up a bank KYC (know your customer) form and give his consent to melt the gold.

The gold is then subjected to a fire assay test, which will ascertain its purity through melting. At this point, the customer will have the option to either take back the melted gold or deposit it.

Should he choose the latter, the collection centre will issue a certificate mentioning the amount and purity of the deposited gold.

When a customer produces the certificate at a bank, it will in turn open a “Gold Savings Account” for the customer and credit the “quantity” of gold into the customer’s account.

Banks have been given the freedom to decide on the rate of interest. The principal and interest will be valued in gold, the draft guidelines stated. “If a customer deposits 100 grams of gold and gets one per cent interest, then, on maturity he has a credit of 101 gms,” the draft stated.

The customer will only take the certificate to the bank. The gold is transferred by the testing centres to the refiners (32 across the country), which will keep them in their warehouses for a fee from the banks.

For the customer, the tenure of the deposit will be one year, and extensions can be made in multiples of it. There’s also the facility to break the lock-in period. Redemption can be in the form of either cash or gold, as decided at the commencement of the deposit.

The scheme also aims to encourage the gems and jewellery sector which has taken a hit after a 10 per cent duty was imposed on gold in 2013 to stop its runaway import.

This will be primarily accomplished through the instrument of “Gold Loan Account” envisaged by the scheme, which will allow banks to lend gold to jewellers.

India imports 800 to 1,000 tonnes of the yellow metal every year. According to conservative estimates, stocks of gold in India are nearly 25,000 tonnes or equivalent to about Rs 63 lakh crore.

This amounts to nearly 56 per cent of the total goods and services produced in the country. Given this context, the “Gold Loan Account” could benefit jewellers in cutting down imports.