Gold Investment in India 2022: The Ultimate Guide

Historically called the “Sone ki Chidiya” translating to a Bird of Gold, India has always had a sense of global pride. Gold as an entity is placed in high regard as an investment vehicle. In this article, we will go through an involution of Gold Investment in India from an NRI perspective.

We will cover the following topics:

Gold Investment in India 2021
Gold Investment in India 2021

Gold Investment in India 2021

Amidst the plethora of elements, Gold is often sought after for investments given their high liquidity and inflation beating capacity. Investments in gold can be done in various forms such as buying Jewellery, Bars, Coins, Gold Funds, Exchange-Traded Funds (ETFs), Sovereign Gold Bond Scheme (SGBS), etc.

The market trend with respect to gold in India makes it a premium investing opportunity for NRIs. Let’s dig into the historical growth of gold rates in India and understand why gold investment in India is one of the best investment vehicles.

Gold Rate Trend in India through the years

YearRate (in Rs.) for 24 Karat per 10 gms
Gold Rate Trend in India through the years

Gold Investment Advice

The rate of growth of gold rates in India evidently highlights the potential of gold investments in India. NRIs from all over the globe can invest in gold and benefit from the exponential growth in its rate over the years.

Comparing the spikes and the falls in the rates throughout the years it can be observed that investing in gold is safer when compared to other risky equity based asset classes. Assessing the metrics, NRIs can easily derive their own Gold Investment Calculator and predict their returns. 

Now, that you have made up your mind, let’s address the next question that comes in the mind of every NRI, which is:

How to invest in Gold in India: Best Gold Investment Plans
How to invest in Gold in India: Best Gold Investment Plans

How to invest in Gold in India: Best Gold Investment Plans

Times are changing! The conventional methods to invest in gold includes buying jewellery, bars, billions, coins or artifacts. But now, NRIs can invest in gold through Gold ETFs and Gold Funds.

Gold ETFs or Exchange Traded Funds is similar to buying actual gold but you don’t buy the gold physically. The gold is stored in paper form in your demat account. Whereas Gold Funds deal with investments in various gold mining companies.

Let’s understand these investment methods through a quick compare and contrast:

Physical GoldGold ETFSGold Funds
Invest in physical goldNo physical goldInvestment in form of bullions and in gold mining companies
No Demat Account requiredDemat Account RequiredNo Demat Account required
Making chargesAsset Management and Brokerage FeesMinimum charge to manage funds
Risk of theftNo risk of theftNo risk of theft
Not paperwork involvedPaperwork RequiredNo Paperwork required if you’re a KYC Compliant else Paperwork Required
Market Fluctuations proportionate to gold pricesDirectly affected by Gold PriceNot affected by change in gold price
How to invest in Gold in India: Best Gold Investment Plans

Another method to invest in gold is through Sovereign Gold Bonds. Let’s understand what they are:

What are Sovereign Gold Bonds?

If you are inclined towards buying gold digitally, Sovereign Gold Bonds (SGB) are the safest option. They are issued by the Reserve Bank of India on behalf of the Government of India with an assured interest rate of 2.50% per annum. The bonds are basically denominated in units of 1gm with a maximum investment limit of 4 kg. The Sovereign Gold Bonds have a tenor of 8 years with exit options from 5th year onwards. These bonds are another way of investing in gold without buying actual gold physically.

Note: NRIs aren’t allowed to invest in SGB. However, if an NRI had invested in SGB while they were a Resident, they can hold it till early redemption/maturity.

NRIs, in the next segment we will browse through some of the top golf funds in India you can consider investing in.

Top Gold Funds in India

  • Axis Gold Fund
  • Aditya Birla Sun Life Gold Fund
  • Canara Robeco Gold Savings Fund
  • HDFC Gold Fund
  • ICICI Pru Regular Gold Savings Fund

Documents You need

  • PAN Card for investments in Gold above Rs. 2 Lakhs
  • For ETFs, you need an account with a brokerage firm along with a demat account with the same firm
  • For Sovereign Gold Bonds (SGBs), the KYC Requirements include documents needed for buying physical gold (Aadhar Card, Voter ID or Passport)

After exploring the mediums to buy gold, we must consider the taxation on buying and selling of gold from all the mediums we discussed above.

Taxation on Gold Investments in India

The taxation on gold investments in India is different for the different mediums chosen for investment. GST (Goods and Services Tax) is applicable while buying gold and the taxation with respect to selling the gold in your possession is dependent on the different mediums you hold the gold in. Let’s explore:

  • Tax on buying Gold: Purchase of gold is charged with a 3% GST along with making charges, if any
  • Tax on sale of Gold: Income tax from sale of gold is calculated on the grounds of how many days you had them in possession. It is taxed on short-term and long-term. The minimum holding period for gold is 3 years. If you sell the gold in 3 years after buying it, the taxation will be done on a short term basis and if the gold is sold after 3 years, it will be taxed on a long term basis.

Taxation on gains from sale of physical gold, Gold ETFs and Gold Bonds is the same, which is:

Nature of GainsTaxation
Short Term As per Tax Slab
Long Term 20.8% (including cess) with indexation benefits
Tax on sale of Gold

Note: The Capital gains arising from the redemption of Sovereign Gold Bonds (SGBs) are exempted from tax. Also, indexation benefit is provided to Long Term Capital Gains arising to any person on transfer of bonds.

In the next and the final segment, let’s understand whether investing in gold is a good idea and why should an NRI do that. 

Is investing in Gold a good idea in India?

Before answering this, let’s understand the motives behind investing in general. Not only NRIs, but why do people invest in general? The basic outcomes that they look for are ROI (Returns on Investments) and Liquidity.

Now, gold as we have already established has inflation-beating capabilities and is a good investment option when considered liquidity, which simply means that you can get instant funds by exchanging gold. Every investment method has its own merit and demerit. Investments in stocks, mutual funds etc will give you the benefit of returns in forms of interest and dividends. But the liquidity factor associated with gold overpowers the returns sometimes.

This can be understood in very simple words, if you are looking to invest for emergency funds and liquidity is your main focus, investing in gold in India is advantageous. Moreover, in the entire article we established that the advantages of investing in gold outperform the disadvantages with an option to invest digitally. It’s entirely on your discretion if you want to invest in physical gold or in other non-physical alternatives like ETFs, Gold Funds and SGBs.

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