Monetisation scheme: Easier norms soon to woo gold depositors – The Financial Express

Clipped from: https://www.financialexpress.com/economy/monetisation-scheme-easier-norms-soon-to-woo-gold-depositors/2362214/

These are among the proposals being considered by the finance ministry before it finalises the next set of changes to the monetisation scheme to draw more people to park their idle gold holding with banks and discourage imports of the precious metal, said one of the sources.

Similarly, people wishing to deposit gold in banks up to 50-100 grams each may not be asked any question by the taxman.Similarly, people wishing to deposit gold in banks up to 50-100 grams each may not be asked any question by the taxman.

The government is exploring the feasibility of exempting deposits made under the gold monetisation scheme (GMS) from the goods and services tax to make it more attractive, sources told FE. Similarly, people wishing to deposit gold in banks up to 50-100 grams each may not be asked any question by the taxman.

These are among the proposals being considered by the finance ministry before it finalises the next set of changes to the monetisation scheme to draw more people to park their idle gold holding with banks and discourage imports of the precious metal, said one of the sources.

The fresh push for monetisation comes at a time when gold imports, having remained subdued in recent years, jumped 254% on year in the first half of this fiscal to $24 billion. Of course, any decision on the GST relief will finally be made by the GST Council where the Centre can push its case.

“Some of these proposals were discussed before the government notified the last set of changes to the monetisation scheme in April. But they were not made part of the changes then. However, these are still being discussed and may feature in the future amendments,” he added.

Currently, interest earned on the gold deposits is exempt from capital gains tax, wealth tax and income tax. The annual interest on gold parked with banks under the existing GMS is up to 2.5%, depending on the tenure of the deposits.

Still, the government had garnered only 21 tonne of gold through the GMS in over four years of its launch before the Covid-19 struck in early 2020.

The bond scheme, however, turned out to be more popular, as the government had sold such papers equivalent of about 30 tonne of the precious metal until then.

During the pandemic, the gold bonds became more attractive than some other asset classes. In August this year, finance minister Nirmala Sitharaman told Parliament that the government had collected Rs 31,290 crore (equivalent of roughly 65 tonne of gold at Tuesday’s price) from the bond scheme since its launch. Still, the combined collections from the gold schemes represent only a tiny fraction of the country’s consumption during this period. India’s gold demand in a normal year stands at 700-800 tonne.

This has prompted the authorities to try and tweak the monetisation scheme regularly, in sync with changing realities and demand, to make it more popular.

The gold schemes (monetisation, bonds and sovereign coins) were unveiled in November 2015 by Prime Minister Narendra Modi to reduce the country’s reliance on the import of the precious metal and curb its debilitating impact on current account deficit. While the gold monetisation scheme is aimed at tapping household stocks, through gold bonds, the government wants to wean away investors from the purchases of the physical metal to “paper gold”.

However, a limited number of collection and purity testing centres (and their lack of desired efficiency), more so in rural areas, and the unwillingness of housewives to get jewelleries having emotional appeal melted so that these can be deposited have dented the appeal of the gold monetisation scheme. With renewed push, though, the mop-up under the monetisation scheme can go up, analysts have said.

However, even though the collection under the GMS hasn’t kept pace with expectations, the current monetisation scheme has witnessed a marked improvement upon an earlier one under which the government had garnered only two tonne of gold between 1999 and 2015.

Indian households, together the world’s largest hoarders of gold, are estimated to have piled up a record 24,000-25,000 tonne of the precious metal, worth over $1.3 trillion.mail logo

Subscribe to FE Daily Newsletter for latest updates on markets, business, money, infra & more, right in your mailbox

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s