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India is one of the largest gold consumers in the world. From jewellery to bullion, the countrymen love to invest in the metal. After all, gold helps people stay safe from inflationary pressures, market volatility, and political turmoil wreaking havoc in the financial markets. In this matrix, gold-saving schemes are a weapon that allows even small investors to stay in the fray.
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Gold saving schemes are financial instruments that primarily operate as systematic investment plans or SIPs, where the investor deposits a small sum usually between INR 500 to INR 10000 monthly. However, the investors do not earn profits. Instead, they get discounts from the jeweller and interest from banks. It’s commonly seen that the dealer/jeweller gives a 75% to 90% discount on the final instalment amount.
Several prominent jewellers in the market offer gold-saving schemes in India. Some of the significant league names include Tanishq, Malabar, Kalyan and PNG Jewellers.
Some banks such as ICICI Bank, Axis Bank, PNB and HDFC Bank have also introduced gold-saving schemes.
Additionally, in 2015, gold schemes were announced in the budget. Idle-lying gold was encouraged to be lent to banks for interest. Jewellers in turn could borrow from the banks.
The three major gold schemes that emerged in India were the gold monetisation scheme, the gold coin and bullion scheme, and the sovereign gold bond scheme.
Since gold schemes related to banks work differently than those of jewellers, we have defined features of the former below:
Note that long-term deposit redemption of bank gold schemes can only be done in cash while short-term redemption can be done in cash and gold.
Say a customer likes a gold necklace at a jeweller’s and enrols in its gold saving scheme for 12 months. The monthly instalment is INR 2,000, and the final instalment is 80% discounted.
Then, by the end of the 12th month, the customer has invested INR 22,400. He can buy gold for the original INR 24,000.
It’s worth noting that while some schemes allow money to be withdrawn prematurely, there is usually a penalty implemented discount-wise.
Not everyone can buy gold in one go. It’s an expensive metal, and these schemes act as piggy banks for a specific consumer purpose: to buy gold either in jewellery or bullion form. Since a smaller monthly amount is deposited instead of a single lump sum value, the schemes are popular among salaried people.
Thus, these make the gold purchases not just simpler but also more affordable.
Choosing the scheme that fits your bill is essential to extract the best possible value. Some of the factors that must be considered are:
Gold-saving schemes are popular in India, allowing small investors to invest in gold affordably. Investors deposit a small sum monthly and receive discounts from jewellers and interest from banks.
Some jewellers offer a 75% to 90% discount on the final instalment amount. Prominent jewellers in India that offer gold-saving schemes are Tanishq, Malabar, Kalyan, and PNG Jewelers. Banks such as ICICI, Axis, PNB, and HDFC have also developed gold-saving schemes.
When choosing a gold-saving scheme, consider factors such as minimum monthly contribution, interest rate/discount, credibility, and penalty for pre-mature withdrawal.
Monthly gold saving schemes are similar to SIPs, where an investor deposits a small sum monthly. These schemes offer discounts from jewellers and interest from banks.
People who want to invest in gold in piecemeal form should look at these schemes.
Yes, these schemes are usually exempt from tax. But, not all schemes are exempt from tax. You must read the fine print before making decisions.
It’s a personal and, therefore, subjective topic. What you like, how much you want to invest, what sort of discount you are looking at, and the credibility of the jeweller usually play a role in decision-making.
It’s again a subjective decision- it varies from person to person. Some people like collecting jewellery and therefore might prefer jewellers’ schemes while those who like to earn interest on their gold might want to opt for bank schemes.
While having advantages of affordability and discounts/interest, gold savings schemes have their drawbacks. Schemes from jewellers limit buying choices, and investments can only be used to buy jewellery. It’s therefore important to buy a scheme from a credible jeweller.
Missing a payment might to forfeiture of accrued benefits. There might also be hidden charges. Therefore, caution is advised.
The buyer can pay in instalments, which is a significant benefit of this scheme.
