If you are looking for a way to monetize your gold holdings without selling them, then the Gold Monetization Scheme (GMS) is an option you should consider. In this article, we will explain what the GMS is, how it works, and what its benefits are.
Gold has always been a popular investment option in India, but it is not very liquid. Selling gold can be a difficult and expensive process. The Gold Monetization Scheme (GMS) was introduced by the Indian government in 2015 to address this problem.
What is the Gold Monetization Scheme (GMS)?
The GMS is a scheme launched by the Indian government to encourage individuals, households, and institutions to monetize their gold holdings. It allows depositors to earn interest on their gold holdings without selling them. The gold deposited in the scheme is used by the government for various purposes, such as lending to jewelers, banks, and other entities.
How does the GMS work?
Under the GMS, individuals can deposit their gold with a bank or a designated agency. The gold is then assayed, and the depositor is given a certificate indicating the weight and purity of the gold. The depositor can choose to open a short-term or a long-term GMS account, depending on their needs.
Types of GMS Accounts
There are three types of GMS accounts:
- Short-term GMS account (1-3 years)
- Medium-term GMS account (5-7 years)
- Long-term GMS account (12-15 years)
Eligibility for the GMS
Any individual or institution that owns gold can open a GMS account. The gold can be in the form of jewelry, coins, or bars. However, the gold must meet certain purity standards, which vary depending on the type of gold being deposited.
Benefits of the GMS
There are several benefits of the GMS:
- Earn interest on idle gold holdings
- No need to sell gold to get liquidity
- The gold is stored safely in a bank locker
- The scheme is backed by the government, making it a safe investment option
- The interest earned on the GMS account is exempt from income tax
Drawbacks of the GMS
There are also some drawbacks to the GMS:
- The interest rates on GMS accounts are lower than those on fixed deposits
- The depositors cannot withdraw the gold until the end of the maturity period
- The scheme is not very popular, and many people are not aware of it
How to Open a GMS Account?
To open a GMS account, you need to visit a bank or a designated agency that is authorized to accept gold deposits under the scheme. You will need to fill out a form and submit your gold for assay. Once the gold is assayed, you will be given a certificate indicating the weight and purity of the gold. You can then choose the type of GMS account you want to open.
How to Deposit Gold in a GMS Account?
To deposit gold in a GMS account, you need to take the following steps:
- Gather your gold: Collect all the gold that you want to deposit. Make sure that it meets the purity standards set by the government.
- Visit the bank or designated agency: You will need to visit a bank or a designated agency that is authorized to accept gold deposits under the GMS.
- Fill out the application form: You will need to fill out an application form for the GMS account. You will also need to provide your PAN (Permanent Account Number) and other identification documents.
- Get the gold assayed: The bank or designated agency will assay the gold to determine its weight and purity. The gold will be melted down and assayed in front of you.
- Receive the deposit certificate: Once the gold is assayed, you will be given a deposit certificate that indicates the weight and purity of the gold.
- Choose the type of GMS account: You can choose the type of GMS account you want to open.
- Deposit the gold: Finally, you will need to deposit the gold in your GMS account. The gold will be stored in a bank locker or a designated vault.
What happens to the gold after depositing it in a GMS account?
The gold that is deposited in a GMS account is used by the government for various purposes, such as lending to jewelers, banks, and other entities. The government pays interest on the gold deposits, which is shared with the depositors. The gold is stored safely in a bank locker or a designated vault.
How to Withdraw Gold from a GMS Account?
To withdraw gold from a GMS account, you need to take the following steps:
- Fill out the withdrawal form: You will need to fill out a withdrawal form for the GMS account.
- Submit the form: You will need to submit the withdrawal form to the bank or designated agency.
- Wait for the maturity period to end: You cannot withdraw the gold until the end of the maturity period.
- Receive the gold: Once the maturity period ends, you can receive the gold in the form of jewelry, coins, or bars.
Taxation of GMS Accounts
The interest earned on GMS accounts is exempt from income tax. However, if you sell the gold that you receive at the end of the maturity period, you will need to pay capital gains tax.
How to Deposit Gold in a GMS Account?
To deposit gold in a GMS account, you need to take the following steps:
- Gather your gold: Collect all the gold that you want to deposit. Make sure that it meets the purity standards set by the government.
- Visit the bank or designated agency: You will need to visit a bank or a designated agency that is authorized to accept gold deposits under the GMS.
- Fill out the application form: You will need to fill out an application form for the GMS account. You will also need to provide your PAN (Permanent Account Number) and other identification documents.
- Get the gold assayed: The bank or designated agency will assay the gold to determine its weight and purity. The gold will be melted down and assayed in front of you.
- Receive the deposit certificate: Once the gold is assayed, you will be given a deposit certificate that indicates the weight and purity of the gold.
- Choose the type of GMS account: You can choose the type of GMS account you want to open.
- Deposit the gold: Finally, you will need to deposit the gold in your GMS account. The gold will be stored in a bank locker or a designated vault.
What happens to the gold after depositing it in a GMS account?
The gold that is deposited in a GMS account is used by the government for various purposes, such as lending to jewelers, banks, and other entities. The government pays interest on the gold deposits, which is shared with the depositors. The gold is stored safely in a bank locker or a designated vault.
How to Withdraw Gold from a GMS Account?
To withdraw gold from a GMS account, you need to take the following steps:
- Fill out the withdrawal form: You will need to fill out a withdrawal form for the GMS account.
- Submit the form: You will need to submit the withdrawal form to the bank or designated agency.
- Wait for the maturity period to end: You cannot withdraw the gold until the end of the maturity period.
- Receive the gold: Once the maturity period ends, you can receive the gold in the form of jewelry, coins, or bars.
Taxation of GMS Accounts
The interest earned on GMS accounts is exempt from income tax. However, if you sell the gold that you receive at the end of the maturity period, you will need to pay capital gains tax.
Conclusion
The Gold Monetization Scheme (GMS) is a government-backed scheme that allows individuals, households, and institutions to monetize their gold holdings without selling them. The scheme offers several benefits, such as earning interest on idle gold holdings and storing the gold safely in a bank locker.
However, there are also some drawbacks, such as lower interest rates and the inability to withdraw the gold until the end of the maturity period. Overall, the GMS is a good option for those who want to earn interest on their gold holdings without selling them.