Gold Bonds in India for NRIs

Gold is an asset whose value increases over time that may be helpful in your hours of need. The government of India has made gold bonds available for investment through banks and other financial institutions. Contrary to the earlier practice, now NRIs can also invest in gold.

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Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

The subsequent increase in gold investment by NRIs is subject to the financial benefits generated by such an investment. If you are an NRI or have a family in India, a gold investment may be a profitable option for you.

What are Gold Bonds?

Government Gold Bonds are known as Sovereign Gold Bonds (SGB) issued by the Reserve Bank of India. The Government of India launched it in November 2015 under the Gold Monetization Scheme. The denomination of such gold is done in multiple grams of gold with each 1 gram unit.

For ages, investing in gold has been an assured way to secure your savings. Through Sovereign Gold Bond investment, you can earn an additional fixed income via interest which is generated semi-annually. Such investments guarantee returns against the gold which has been paid for.

With the help of SGB investment, you can watch the savings increase without caring much for gold physically.

Sovereign Gold Bonds investment lasts for 8 years. If you are willing, you have an option to exit the investment tenure before your next interest payment date. The issue price for SGB for the session 2020-21 has been announced at Rs 4732 per gram of gold. The Reserve Bank of India provides a special discount of Rs 50 per gram less than the fixed value if you are going to apply online and make payment digitally.

Gold: A Valuable Asset for NRIs

Due to inflation and the ongoing pandemic, gold prices have seen a considerable hike in the past year. This hike has brought down the purchasing power of many, making gold an asset desired by all. Thus, the introduction of gold investments has facilitated Indians to secure an asset for troubling times.

Along with Indian residents, NRIs can also invest in gold in several different ways. NRI gold investments can be made in 5 years, 10 years, and 30-year bonds for the session 2020-21. The Reserve Bank of India issues new tenures for investment by NRIs from time to time. For NRIs, digital gold is a great way to invest without handling it physically. The Government of India provides an interest rate of 2.5% per annum.

NRI Gold Investment

Although NRIs cannot invest in SGB after attaining their NRI status, if you are one of those NRIs who have already invested before becoming a Non-Resident Indian, you can retain the investment till the date of maturity of the bond. Not being able to avail of Sovereign Gold Bonds does not mean that you cannot invest in gold from other avenues.

The Government of India has provided various opportunities for NRIs to invest in gold with the help of other schemes. These schemes may be in the form of jewelry purchases, gold bars, gold coins, Gold Exchange Traded Funds, Gold Funds, and E-Gold.

By delving into the following points, you would be able to understand the different ways for NRIs to invest in gold in India:

Physical Gold: The traditional use for gold in India has always been in the form of ornaments and jewelry. As time progressed, gold was seen as a model for hedge used during the time of crisis in Indian households. Investing in the physical form of gold is still quite prevalent. NRIs can also take advantage of this tradition by purchasing gold from India in Indian currency in varied forms like jewelry, coins, and bars.
Digital Gold: If you are an NRI and do not want to buy gold physically, there are other ways to do that. You can buy digital gold equivalent to the amount of physical gold. This way of purchasing gold eliminated the problems which came with buying physical units. NRIs can buy digital gold online and store it in insured vaults. NRIs can buy digital gold in three ways other than the Sovereign Gold Bonds. They are:

E-gold: E-gold is a way of investing in gold, with physical gold being traded. It was launched in the year 2010 by the National Stock Exchange. E-gold units can be bought and sold like shares through NSE. One unit of E-gold is equal to one gram of gold.
Gold Funds: Gold funds are open-ended funds that aim to create wealth by using gold as a commodity. They are suitable for NRIs who want to make maximum benefit from digital gold.
Gold ETF: Gold ETFs are gold Exchange Traded Funds introduced to track domestic gold's price. Gold ETFs are passive instruments of investments based on the prices of gold. NRIs can invest in gold ETFs, which represent gold units in the form of paper.

Think Before Investing

As an NRI, you must keep certain things in mind before investing in gold in India:

How much to invest: You must be aware of the returns produced by gold to speculate your profit over time. Investing all your savings in one entity is not always a good idea. It is advised by experts to section your savings at the time of investing. It is beneficial to invest 5% to 15% of your total assets in gold.
Physical Gold: NRIs can buy physical gold in three forms: jewelry, bars, and coins. Jewelry is a safe investment. The only downside with jewelry is the loss of value at the time of melting. Gold coins and bars come along with an international assay certification which guarantees their purity. NRIs can invest in gold coins which are proven to be the most profitable method of dealing in physical gold.
Tax Implications: NRIs have to pay income tax for selling physical units of gold. Similarly, wealth tax is also charged for the possession of gold. NRIs have to pay taxes if their wealth is more than Rs 30 lacs within a financial year.

FAQ's

Q. Is it possible for NRIs to import gold from India?

Ans: Yes. NRIs can import gold in the form of bars, ornaments, and coins up to 1 kg on their visit to India. However, this comes with the condition that NRIs must have lived outside India for a minimum period of six months. According to the rules of the Indian government, this facility is only available for NRIs after their stay abroad has completed six months or more.
Q. What are the minimum and maximum quantity limits for purchasing gold through Sovereign Gold Bonds?

Ans: The minimum investment quantity in Sovereign Gold Bonds is 1 unit of gold equivalent to 1 gram in weight. The maximum quantity for investing in Sovereign Gold Bonds is 4 kg for individuals and HUF. 20 kg is the maximum investment limit for trusts and other entities, notified by the Government of India.
Q. What are the documents needed to invest in gold in India?
Ans: You require the following documents if you are planning to invest in gold in India:
- For investment above Rs 2 lacs in physical gold, a PAN card is required.
- For ETF investments, NRIs must have an account with a brokerage firm.
- For ETF investments, NRIs must also have a Demat account with the same brokerage firm.
- Indian residents, who want to invest in Sovereign Gold Bonds, must fulfil all KYC requirements.
- Copy of Passport
Q. What is the redemption price for Sovereign Gold Bonds?

Ans: At the time of maturity of the bond, the Gold Bonds would be redeemed as per the Indian currency. The redemption price would be according to the simple average of the gold closing price. The amount generated after the redemption of the bond will be credited to your registered bank account. The Sovereign Gold Bond redemption price regulations are followed as per the provisions prescribed by the India Bullion and Jewelers Association Limited.
Q. What are the advantages for NRIs investing in Digital Gold?
Ans: Digital gold has many advantages when it comes to NRI investment:
- Digital gold can be bought in fractions as low as Rs.10 at a time.
- You can liquidate the gold and get your profit within 2 days of purchase.
- They are completely secure and have trustee verifications.
- They do not have any making charges, and their price is tracked through live market tracking.

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^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).