An Article on Gold
Gold is one of the most precious and high-demand metals in the world. Gold is considered a strong store of value and is held by countries as a reserve asset instead of foreign currency. Gold investment is generally safer when compared to equities.
Gold purity is measured in karats (K). 24K gold has the highest purity. However, for ornaments, 22K gold is widely used because pure gold is very soft and not suitable for making jewellery. Copper and other metals are added to make ornaments durable.
GST on gold in India is 3%.
As per current gold holding rules (as of May 2024), the following quantity of gold can be held without documents:
* A married woman can hold up to 500 grams of gold without any proof. Beyond this limit, valid documents are required.
* An unmarried woman can hold up to 250 grams of gold without proof. Beyond this limit, documents are mandatory.
* Men can hold up to 100 grams of gold without proof. Holdings above this limit require proper documentation.
From an investment standpoint, there are multiple ways to invest in gold.
1. Physical Gold:
Physical gold is the best option when buying jewellery for personal use. It can also be used as collateral for loans from financial institutions. However, when selling old gold ornaments, the price received may not always be fair. Investors have to pay GST, making charges, and import duties. Physical gold also involves higher storage and safety costs.
2. Digital Gold:
Digital gold is a popular gold investment option where gold is bought and stored digitally. GST is applicable on digital gold purchases along with the gold price. One major advantage is that there is no storage concern. Digital gold can be sold anytime at the prevailing market rate, and the amount is credited directly to the linked bank account. If gold prices rise, digital gold value also increases.
3. Gold ETF:
Gold ETF (Exchange Traded Fund) is another way to invest in gold. These are offered by fund houses for a nominal charge. If the gold price increases, the value of the Gold ETF also rises. Investors must buy at least one unit, and prices may vary between different Gold ETFs.
Gold ETF storage cost is low. Selling ETFs is easy, but transactions are executed only during market trading hours.
4. Gold Mutual Fund:
Gold mutual funds are another option to invest in gold without physical ownership. Asset Management Companies (AMCs) charge an expense ratio, and returns depend on changes in gold prices.
This option has low storage cost and offers easy redemption, with proceeds credited directly to the bank account.
5. Sovereign Gold Bond:
Sovereign Gold Bonds (SGBs) are one of the most preferred gold investment options. These bonds are issued by the Reserve Bank of India (RBI). SGBs represent gold investment without physical holding and have a maximum tenure of 8 years.
RBI usually opens Sovereign Gold Bond subscriptions multiple times a year. The minimum investment is one gram of gold, and the maximum purchase limit is 4 kg per individual per financial year.
SGBs offer an additional 2.5% annual interest on the invested amount, paid semi-annually. Since they are backed by the RBI, they are safe and secure, with zero storage cost.
SGBs can be sold in the secondary market before maturity. Premature redemption is allowed after 5 years, subject to conditions. On maturity after 8 years, the returns are tax-free.
Currently, new Sovereign Gold Bonds are not being issued, but they can still be purchased from the secondary market.
Conclusion:
Sovereign Gold Bonds offer tax exemption on maturity. Other gold investment options are subject to taxation based on the applicable tax slab.
Including gold in an investment portfolio helps in diversification and provides stable returns over time, as supported by historical gold price performance.
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