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Can NRI Invest In Gold ETF In India
In India, NRIs (Non-Resident Indians) are able to invest in Gold ETFs. They must adhere to KYC regulations and own an NRE or NRO account or directly with Asset management companies (AMCs). Through the stock exchange, investments may be made by registering with an Indian broker. There is a capital gains tax on profits.
If NRIs plan to send money overseas, they should also be aware of the repatriation regulations. To fully comprehend the unique laws and tax ramifications related to investing in Gold ETFs in India, speak with a financial counselor or tax specialist. This guarantees adherence to the legal frameworks of both India and their own nation.
Unfortunately NRIs are not eligible for investing in Sovereign Gold Bonds (SGBs) but if you recently changed your status from a resident of India to NRI and are worried about the investment in sgbs before attaining the status don’t worry as you can hold on to your bonds until maturity or opt for premature Redemption.
Why invest in gold?
1. Gold acts as a hedge against currency depreciation when inflation Rises the value of currencies takes a hit but gold stands out in the long run almost all major currencies have depreciated in value relative to Gold.
when the value of the US dollar fell against other currencies from 1998 to 2008 people moved to gold the price of of gold nearly tripled and reached,1000 per round in early 2008 if you’re not tracking gold prices let me remind you that gold prices have doubled over the last 5 years if we consider a 10-year time span gold prices have quadrupled.
2. Gold acts as a safe haven during geopolitical tensions gold shines even brighter during uncertain times serving as a safe haven for investors recent geopolitical tensions from Russia’s actions to trade disputes have increased Global unees Investors find solid Gold a tangible asset with a history of holding its value
central banks and Emerging Markets are boosting their gold reserves in responding to a Fractured world and concerns about economic stability in 2022 they bought a whopping 1100 metric tons of gold far surpassing the annual average of 473 metric tons between 2010 and 2021 this trend is on a rise and could extend for years geopolitical worries coupled with expectations of future Fed rate Cuts make gold even more attractive to investors seeking a reliable Haven.
Don’t believe that gold is becoming more and more popular check out this headline gold gain of about 19% in The Last 5 Years. now these remarkable figures make a compelling case for gold Investments I bet you’re excited too before we dive into how NRIs can invest in gold here’s a tip if your goal is an investment choose options with liquidity transparency control costs and a short Purity if you want to utilize gold for personal use treat it as consumption not just investment.
How can NRIs invest in gold?
There are essentially two types of gold investment you can explore-:
PHYSICAL GOLD
- When discussing physical gold, we mean tangible assets physically held by investors. Primary for NRIs include Jewellery.
- When investing in gold jewelry, NRIs should factor in not just the gold’s cost but also additional expenses like making charges and GST ( Goods and Services Tax).
The second form of physical Gold is Bullion
- Gold Bullion, such as bars or coins, is a direct investment in the raw material. The process involves paying the market price without additional making charges, making it a straightforward investment.
PAPER GOLD
Paper gold refers to gold investments in non-physical, paper, or digital form. These allow investors to participate in the gold market without owning the metal.
Different types of paper gold
1. Digital Gold
Digital Gold allows electronic ownership of 24-karat hallmark gold through digital platforms.
For example, investing 10,000rs at 4,000rs per gram results in owning 2.5 grams of digital gold, excluding making charges.
Non-resident Indians (NRIs) can easily invest in digital gold through online platforms.
However, a demat and trading account are prerequisites for investing in digital gold.
2. Gold ETFs
A gold ETF tracks the domestic physical gold price, providing a simple way to invest without the hassle of physical storage. Each unit represents 1 gram of 99.5% pure physical gold.
Gold ETFs, traded on exchanges like NSE and BSE, Offer Tax efficiency and transparent real-time prices. They function like stock investments bought and sold through a broker with a demat account during trading hours.
Benefits include guaranteed purity, as ETFs are backed by physically stored high-purity gold.
Securely stored in a Demat account, Gold ETFs save deposit locker charges and can serve as collateral for loans. These perks make Gold ETFs a robust investment choice.
3. Gold Mutual Funds
Gold Mutual funds pool funds from multiple investors and invest in gold through gold ETFs, offering easy liquidity without physical storage concerns. Periodic investments can be made via SIPs.
In terms of investment approach, these funds track gold price movements by investing in gold bullion or gold-related securities.
Operationally, gold mutual funds are open-ended, allowing investors to buy or sell units at any time, with returns like ETF performance.
Units in gold mutual funds, don’t directly represent gold quantity; the net asset value NAV) reflects the overall holdings value.
NRIs can invest in Gold mutual funds through their NRE/NRO accounts or directly with Asset management companies (AMCs).
Pricing is based on unit prices determined by NAV disclosed at the end of trading hours.
Importantly, consider Exit Load: a fee may apply for redemptions within the lock-in period.
E-Gold
E-Gold, launched in 2010 by NSE, facilitates electronic trading of physical gold, with each unit representing one gram. It offers a secure alternative to traditional gold ownership.
You can invest in E-Gold using your Demat account. To sell, a trading account with designated NSEL dealers is required.
Advantages of E-Gold
- Ease of transaction: Effortlessly buy or sell gold online, providing convenience and flexibility.
- Safety assurance: Eliminates concerns about theft or physical loss associated with tangible gold ownership.
- Purity Guarantee: backed by 99.9% pure physical gold, assuring investors of the gold’s quality.
- Fractional ownership: E-Gold enables investors to buy small amounts of gold, promoting fractional ownership.
TAX IMPLICATIONS ON GOLD INVESTMENT
The tax rate on gold sales for NRIs is the same as for Indian residents however NRIs must be TDS on gold ETF or mutual fund redemptions. No more confusion but there are a few exceptions-
Tax on Physical Gold Investments
For NRIs selling gold within three years, short-term capital gains are taxed at their individual slab rate, while holding it for more than three years incurs long-term capital gains taxed at 20% plus a 4% cess.
Tax on Paper Gold Investments
In the realm of gold investments, we have modern options like digital gold and Gold ETFs, akin to traditional gold but with contemporary twists.
Tax on Digital Gold Investments
It mirrors physical gold with a 20% tax and a 4 %cess on long-term gains for holdings of three years or more.
Tax on Gold ETF Investments
Gold ETFs, gold coins/bars, and jewelry held for 36 months or more are considered long-term capital assets, subject to a flat 20% tax rate after indexation for investments until March 31, 2024.
Profit within the initial 36 months from gold ETFs are treated as short-term capital gains, taxed at applicable slab rates.
Short-term gains within 36 months are taxed at applicable slab rates, providing a snapshot of the tax landscape for gold investments.
WEALTH TAX
If your wealth exceeds 30 lakh rupees from assets including jewelry, furniture, and golden utensils you’re in the wealth tax.
DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA)
It’s your global tax pass: To avoid being taxed twice on the same income if you’ve already paid tax on capital gains in another country flash that DTAA pass and you’re off the hook in India.
TAX EXEMPTIONS
Section 54F of the Income Tax Act serves as a tool to combat long-term capital gains taxes arising from gold sales.
Conclusion
You have two investment choices based on your needs first is a physical goal which is ideal for consumption second is the paper goal which is apt for liquidity transparency and control costs NRIs can’t invest in SGBs but existing Investments can continue until maturity and paper gold option you also get digital gold, Gold mutual funds gold ETFs and E-gold each has unique advantages research and consult service providers before investing.
Frequently Asked Questions (F&Q)
1. Can an Indian resident keep NRI as a nominee under the SGB scheme?
An Indian resident can nominate an NRI under the SGB scheme. If the investor passes away, the NRI nominee can receive the security, with the condition that the gold is held until maturity, and repatriation to India is avoided.
2. How much gold can NRI bring to India?
NRIs abroad for over a year can bring gold to India without customs duty in their bonafide baggage. The limit is 20 grams for male passengers (up to 50000rs) or 40g for female passengers (up to 1000000.
3. What documents are required to invest in gold in India?
To invest in gold in India, prepare your know-your-customer (kyc) documents, including PAN and Aadhaar card. A passport copy may also be required and submission of a PAN card is mandatory for gold purchases exceeding 2 lakh rupees.
4. Are there any fees involved in storing physical Gold for NRIs?
Yes, annual charges are associated with storing physical gold for NRIs, particularly in bank lockers.
5. What options do NRIs have for transferring their gold investments to another individual?
NRIs can transfer physical gold through gifting or selling. For digital gold or gold mutual funds, the process depends on the platform or bank policies.
