Is it end of NRIs taking gold back to India?

Gold has been a very popular investment option for Indians and those living abroad (especially in the Gulf) have been taking bullion and jewellery back home with each visit.

However, this became difficult after the Indian government put strict controls and import duty on gold.

Now, the Indian cabinet has approved a new Gold Bond and Gold Monetisation scheme to reduce the metal's demand in physical form and fish out idle gold lying with households and other entities.

The new scheme allows Indians to buy 500 grams per person in India and will be issued in 2, 5 and 10 grams of gold or other denominations. The tenor of the bond could be for a minimum of 5-7 years so that it protects investors from medium-term volatility in gold prices.

To make the scheme popular, the draft gold monetisation scheme provides for incentives to the banks, while individuals and institutions can deposit as low as 30 gm of gold, while the interest earned on it would be exempt from income tax as well as capital gains tax, as reported in the Indian media.

It’s still too early to say if this will impact gold being imported to the country and if NRIs, who want to buy gold in bigger amount, will opt for this option and not risk custom duties at the Indian airports.

“I will continue taking home the permitted amount but that is very small so I will ask my wife, who lives in India, to buy gold bonds if I want to invest more in gold,” said Ramesh Chaturvedi, an Indian resident living in Dubai.

Reducing imports is one of the targets of the scheme. The government says it expects the scheme will reduce country's reliance on the import of gold over the years and put it to productive use.

According to estimates, India paid $34.32 billion to import around 930 tonnes of gold in the year ending March 2015.

The existing custom rules allow Indians coming to India to bring in around Dh2,891 (Rs50,000) worth of gold if they are male or Dh5,782 (Rs10-, 000) if they are female. If you are carrying gold over and above these limits, you will be subject to duty.

Moreover, duty free allowance is only for gold jewellery not for gold. There is no duty free allowance for gold biscuits etc.

Therefore, duty is to be paid on bringing into India gold in pure form i.e. other than in form of jewellery irrespective of amount involved.

You need to pay duty which presently is 4 per cent of notified value in case of gold bars bearing serial number, weight and manufacturer's name and 10 per cent in case of any other kind of gold, including jewellery, making it difficult to carry gold, so many like Chaturvedi would prefer to buy it in India to avoid the hassles at the airports.

(Image via Shutterstock)

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