Is gold investment chit scheme good?


My local jewel is offering a gold investment scheme. Provided I trust the jeweler with my gold and money what are the other things I need to watch out for?



If you are looking to invest in gold, gold investment scheme offered by a jeweller may not be a great idea. Investment in physical gold is highly susceptible to theft and burglary, however, if you invest in an ETF or gold bonds then you can keep the investment safe. Physical gold requires careful handling and is unsafe when kept at home. ETF and gold bonds are kept in the dematerialised form and held in a demat account, therefore it is very safe and easy to handle.

If you hold physical gold, ETF or gold bonds for more than 3 years, then it is considered as a long-term holding and becomes eligible for long-term capital gain (LTCG) at 20% with indexation. Selling before 3 years is considered as short-term capital gain (STCG) and the gain is taxed as per applicable slab rate of the individual. However, gold bonds allow one more advantage on the tax front. If you hold it until maturity and redeem it after it’s maturity period, then the complete gain is tax exempt.

The rates of ETF and gold bonds are linked to the physical gold rates. So, the capital appreciation benefit of all the three investment products are same, however, in addition to capital gain benefit, gold bonds also offers interest at 2.5% p.a. on the invested value to its investors. So, if you are investing for a very long period, then 2.5% p.a. interest can make a big difference to the overall return.

Not interested in gold bonds? How about Mutual Funds? Click here to explore funds.

BB Expert