An NRI’s Guide To Investing In Gold

Personal Finance

For many centuries, the yellow metal has been a crucial component of any investing portfolio. Institutions, as well as individuals, make gold investments. The world’s central banks and reserve banks make significant gold investments. They preserve it as a part of their stockpile. They purchase gold when the price is low and sell it when they realize it has increased in price too much.

Individual investors have different factors to take into account. While gold has historically been used in India for jewellery for both men and women and for usage at social occasions and weddings, this is only a minor portion of the use of gold. However, gold has moved past this point and is now valued for various reasons in addition to its social and aesthetic worth.

Experts have traditionally recommended that one put 5–15% of their overall assets into gold. There is a strong possibility for gold investment outside India due to the gold price growth. Due to its phenomenal pace of growth, gold is a very advantageous investment for NRIs. Gold investments made by NRIs may be a wise choice.

How can NRIs make a gold investment?

NRIs, or non-resident Indians, can invest in physical gold items like jewellery, bars, or coins. The preferable choice is to invest in paper gold through gold funds, gold bonds, or exchange-traded funds (ETFs), which do away with purity concerns, cost concerns, and storage headaches. Let’s have a closer look at the NRI’s gold investment options in paper gold:

  • Gold ETF

Mutual funds that invest and extract value from assets include Gold ETFs. NRIs require a PINS account to invest in Gold ETFs in India through the Stock Exchange. However, they must essentially acquire or sell in multiples of 1000 units. They can purchase it via fund houses.

  • E-gold

This is a fantastic option for NRIs wishing to make a small gold investment. This is possible in lesser denominations in the Demat account, starting with just 1 gram of gold and its multiples. This gold investment plan functions similarly to an equity share plan, has great liquidity, and doesn’t require storage.

  • Sovereign Gold bonds

Sovereign Gold Bonds are a practical choice for those who want to purchase gold digitally. With a good interest rate annually, the Indian government has launched this program; however, NRIs are not permitted to invest in Sovereign gold bonds. They may, however, hold the bonds until early redemption or maturity if they purchased them before obtaining NRI status.

  • Gold Funds

Gold funds are Investments in gold bars available through numerous gold mining and production companies. Mutual fund investing and gold fund investing are very similar.

Tax Levied on NRI Gold Investment. 

Here are the taxes applicable on physical gold, paper gold, and wealth.

  • Income Tax on Physical Gold.

Short-term capital gains tax is due when selling gold in its physical forms, such as jewellery, coins, and bars, within three years after purchase. Long-term capital gains tax is due when selling gold after that time.

  • Income tax on Paper Gold.

No TDS is due when NRI purchases and sells Gold ETF units through an exchange. An NRI investor can therefore self-assess while filing returns. However, TDS will be taken out if direct redemption occurs with the fund house.

  • Wealth Tax.

Gold ownership is subject to wealth tax. An NRI must pay taxes if his wealth from assets exceeds Rs. 30 lakh in a given fiscal year. Jewellery, bullion, and items made of gold or other precious metal are all considered assets.

How can NRI save Gold Tax?

While there are no export taxes on gold leaving India, there can be import taxes in the nation of the resident. NRIs must determine whether local regulations in their home countries allow gold sales and what tax consequences may result. They must be informed that NRI gold investments are subject to income tax laws.

Tax losses against gains from the sale of gold may be used to balance any capital gains taxes from the sale of other asset categories in India (such as shares, mutual funds, etc.). Tax laws provide that tax obligations from long-term capital gains can only be offset by capital gains, but tax obligations from the sale of short-term capital gains can be offset by long-term or short-term capital gains.

If NRIs purchase Capital Gains Tax Savings Bonds, they may be eligible for exemptions under Section 54EC. During tax planning, NRIs must review local tax rules that apply in their place of residency.

Finishing Up.

In India, gold has been a valued commodity from ancient times to the current generation; this is why Indians strongly prefer gold as an asset class. It is the safest and most lucrative investment available, aside from real estate, even for NRIs.

Opportunities for NRI gold investment in India are created by the rising gold price in India. After examining the rise and fall in rates, it was found that investing in gold in any form, including NRI gold bonds, produces profitable results. Visit our website to find more useful and informative blogs.