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Gold Monetisation Scheme (GMS), 2015

Gold Monetisation Scheme (GMS), 2015


The Government of India announced the Gold Monetisation Scheme vide its Office Memorandum F.No.20/6/2015-FT dated September 15, 2015. The objective of the Scheme is to mobilise gold held by households and institutions of the country and facilitate its use for productive purposes, and in the long run, to reduce country’s reliance on the import of gold.

The Gold Monetization Scheme comprises of the previous ‘Gold Deposit Scheme’ and the ‘Gold Metal Loan’ scheme, revamped and linked together in GMS. Under GMS minimum gold deposit at any one time is 30 grams of gold (bars, coins, jewellery excluding stones and other metals).

The gold is accepted at the Collection and Purity Testing Centres (CPTC) certified by Bureau of Indian Standards (BIS). The deposit certificates are issued by banks in equivalent of 995 fineness of gold. The designated banks(ICICI Bank , Corporation Bank/Union Bank of India , Indian Overseas Bank , Punjab National Bank , State Bank of India , HDFC Bank , Yes Bank , Dena Bank/Bank of Baroda ) accept gold deposits under the Short Term (1-3 years) Bank Deposit (STBD) as well as Medium (5-7 years) and Long (12-15 years) Term Government Deposit Schemes (MLTGD). While the former is accepted by banks on their own account, the latter is on behalf of the Government of India.

Interest: The amount of interest rate payable for deposits made for the short-term period is decided by the banks on the basis of the prevailing international lease rates, other costs, market conditions etc. and the same is born by the banks. For the medium and long-term deposits, the rate of interest is decided by the government, in consultation with the RBI from time to time and the same is born by the Central Govt. 

Redemption: For short term deposits, the customer will have the option of redemption for the principal deposit and interest earned in cash (in equivalent rupees of the weight of deposited gold at the prices prevailing at the time of redemption) or in gold (of the same weight of gold as deposited), which will have to be exercised at the time of making the deposit. ln case the customer will like to change the option it will be allowed at the bank's discretion. Redemption of fractional quantity (for which a standard gold bar / coin is not available) would be paid in cash. For medium and long term deposits also redemption will be both in cash and gold. However, the interest will be paid on the equivalent rupees of the weight of gold deposited at the time of deposit.

Tax implications on GMS shall be notified by the Central Government from time to time. However, it is clarified that Tax exemption, same as those available under GDS, would be made available to the customers, in the revamped GDS, as applicable. In this direction, the enabling notifications issued by GOI are: (a) Exemption of interest earned on gold deposit bonds from Income Tax vide amendment to section 10(15)(vi) of the Income Tax Act by Finance Act 1999. Exemption of various assets deposited in the scheme from Wealth Tax under Section 2(ea) of Wealth Tax Act as amended by Finance Act 1999. (b) Exemption from capital gains made on the bonds though trading or at redemption from Capital Gains Tax under section 2(14)(vi) of Income Tax Act as amended by finance Act 1999.

Further, as per CBDT instructions No. 1916 dated 11th May, 1994 in course of IT Search u/s 132, gold jewellery to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family, need not be seized by the authorities, but the tax penalties, as applicable will be levied.

  1. Revamped Gold Metal Loan Scheme

Gold Metal Loan Account: A Gold Metal Loan Account, denominated in grams of gold, will be opened by the bank for jewelers. The gold mobilized through the revamped GDS, under the short-term option, will be provided to jewelers on loan, on the basis of the terms and conditions set-out by banks, under the guidance of RBI. Delivery of gold to jewelers: When a gold loan is sanctioned, the jewelers will receive physical delivery of gold from refiners. The banks will, in turn, make the requisite entry in the jewelers’ Gold Loan Account. Interest received by banks: The interest rate charged on the GML will be decided by banks, with guidance from the RBI. Tenor: The tenor of the GML at present is 180 days. Given that the minimum lock-in period for gold deposits will be one year, based on experience gained, this tenor of GML may be re-examined in future and appropriate modifications made, if required.

  1. Indian Gold Coin

The Indian gold coin is a part of the Gold Monetisation Programme . The coin is the first ever national gold coin minted in India and has the National Emblem of Ashok Chakra engraved on one side and Mahatma Gandhi on the other side. The coins are available in denominations of 5, 10 and 20 grams. The Indian Gold coin & bullion is unique in many aspects and carries advanced anti-counterfeit features and tamper proof packaging.
The Indian Cold coin & bullion is of 24 carat purity and all coins & bullion are hallmarked as per the BIS standards.

  1. Amendments in Gold Deposit Scheme and India Gold Coin

Ministry of Finance has approved amendments to Gold Monetisation scheme and amendments to Indian Gold Coin Scheme vide its Office Memorandum No. 1/21/2020-FT dated 9th February, 2021 which aim, to make the scheme simple, attractive and successful. The key amendments include increasing the number of branches of Public Sector Banks in all towns to be designated as GMS service branches, collaborating with reputed Jewellers to act as Collection and Mobilisation Agents of gold under GMS, allowing participating banks to buy locally refined/ sourced gold from refineries and Gold Spot Exchanges, allowing Interbank lending of gold for GML, reducing the minimum deposit under R-GDS to 10 grams of gold, etc.  The key amendments to Indian Gold Coin Scheme include availability of IGC in both 999 and 995 purity, minting in smaller denominations, sale through online e-commerce platform and flexibility to mint commemorative and other order gold coins.

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