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:
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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.
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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:
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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.
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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.
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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:
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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.
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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.
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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.
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