Press Trust of India
New Delhi, Nov 5: Prime Minister Narendra Modi Thursday launched a scheme to channelise gold worth over Rs 52 lakh crore lying with households into the banking system and floated paper bonds to curb its imports that have made India the largest buyer of gold in the world. India imports a staggering 1,000 tonne of gold every year, draining out foreign exchange and putting pressure on the fiscal deficit. An estimated 20,000 tonne of gold worth over Rs 52 lakh crore is lying with households and temples.
Modi also unveiled the first ever Indian gold coin and bullion, bearing national emblem Ashok Chakra on one side and Mahatma Gandhi’s image engraved on the other side. Describing the schemes as an example of “sone pe suhaaga” (icing on the cake), the Prime Minister said people should take advantage of these plans and help in nation building. Under the Gold Monetisation Scheme (GMS), 2015, banks will collect gold for up to 15 years to auction them off or lend to jewellers from time to time. Depositors will earn up to 2.50 per cent interest per annum, a rate lower than bank deposits.
With the objective to bring down physical buying of gold, the Sovereign Gold Bonds Scheme was launched that offers 2.75 per cent annual interest rate. Buyers will have to disclose their permanent account number (PAN) and other know your customer (KYC) documents. Initially the coins will be available in denominations of 5 and 10 grams. A 20 gram bullion will also be available through 125 MMTC outlets. Observing that there is no reason for the country, which has 20,000 tonne of gold lying idle with households and institutions, to remain poor, he said, with some efforts and right policies India can get rid of this tag of (poor nation).
Speaking on the occasion, Finance minister Arun Jaitley said it is essential to discourage gold imports and the bond scheme is expected to lower demand for physical gold. Jaitley further said that gold lying idle with individual can be a personal savings but it does not help in the development of the country. He expressed hope that people would take advantage of these three schemes. The Prime Minister described the launch of the Indian Gold Coin, bearing the Ashok Chakra, as a matter of pride for the nation and said that people will no longer have to depend on foreign-minted gold bullion or coins. The minting of coins will also promote the Make in India initiative of the government. As far as the Gold Monetisation Scheme is concerned, 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 made from it. The designated banks will accept gold deposits under the Short Term (1-3 years) Bank Deposit as well as Medium (5-7years) and Long (12-15 years) Term Government Deposit Schemes.
The designated banks may sell or lend the gold accepted under the short-term bank deposit to MMTC for minting India Gold Coins and to jewellers, or sell it to other designated banks participating in the scheme. With regard to Sovereign Gold Bonds, capital gains tax treatment will be the same as for physical gold for an ‘individual’ investor. The department of revenue has said that they will consider indexation benefit if bond is transferred before maturity and complete capital gains tax exemption at the time of redemption.
