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The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of January 15, 2024.

An investment opportunity worth its weight in gold

Indians have a strong cultural and historical affinity for gold, which has translated into a significant interest in gold investments across generations. Both residents and Non-Resident Indians (NRIs) view gold as a way to protect their wealth from inflation and economic uncertainties.

Please note, you do not need a Portfolio Investment Scheme (PINS) account to invest in any gold instrument.

As an NRI/Person of Indian Origin (PIO)/Overseas Citizen of India (OCI), you can invest in gold in India. The avenues include:

 

1. Gold Exchange-Traded Funds (Gold ETFs)

Gold ETFs allow you to invest in gold in a dematerialised format. One unit of gold ETF is backed by one gram of physical gold with 99.5% purity. There is transparency in the trading price of gold ETFs as they are directly linked to the physical prices of gold. Gold ETFs are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd (BSE) like a stock of any company. They can be bought and sold on these exchanges using a demat and trading account. To know more about NRI demat accounts, click here.

You can invest in gold ETFs with funds from either your NRE or NRO bank accounts. Your investments in Gold ETF shall be done through Non-PINS account only.

 

2. Gold mutual funds

Gold mutual funds are fund of funds that invest in various forms of gold, such as physical gold, gold ETFs and/or related assets. You can invest in gold mutual funds directly from a fund house or through distributors such as banks, brokerage firms, etc. If you wish to hold gold mutual funds in digital form, you will require a demat and trading account. You can invest in gold mutual funds with funds from either your NRE or NRO bank accounts. Your investments in gold mutual funds shall be done through Non-PINS account only.

 

3. Digital gold

Digital gold is a way of purchasing gold in a digital format. Every investment is backed by an investment in 24 karat physical gold. They are tradeable on the National Spot Exchange Limited (NSEL). You will need a demat account with a registered brokerage firm to invest in them. You can buy and store digital gold in a demat form and if you wish, you can also redeem it to take physical delivery of the gold. 

 

4. Physical gold

You can invest in physical forms of gold such as gold jewellery, coins and bars.

Did you know?

As an NRI, you are not allowed to make any new investments in Sovereign Gold Bonds (SGBs) as per the Reserve Bank of India (RBI) and prevailing Foreign Exchange Management Act (FEMA) regulations.

 

However, as a resident Indian, if you had invested in SGBs in the past, you are permitted to hold them up to their maturity or opt for an early redemption. Typically, SGBs have a maturity of eight years with an exit option after five years of completion.

Tax implications on NRI gold investments

The taxability of your gold investments depends on the nature of the transaction and the instrument used, i.e., physical gold or digital gold (gold ETFs, digital gold and gold mutual funds). On the sale of such assets, you will be liable to pay capital gains tax in India, either short-term or long-term, depending on the holding period.

Gold investments received by way of gifts/inheritance from relatives (defined under section 56 2(vii) of the Income Tax Act, 1961) are not taxable. If you receive the above-mentioned gold assets worth more than ₹50,000 as a gift from non-relatives, then taxes need to be paid on the aggregate value of such assets and not only on the excess value over ₹50,000. To know more about taxation rules on gifts and inheritances, click here.

Gold investments will be taxed as follows:

Please note, tables are best viewed on desktops or in landscape mode on mobile phones.

Particulars Taxability Tax rates

Sale of physical gold/digital gold

Short-term capital gain: If the asset is held for less than 36 months

At the prevailing income tax slab rates

Long-term capital gain: If the asset is held for more than 36 months

20% with indexation

Sale of gold ETF/gold mutual funds (debt-oriented) that were purchased before April 1, 2023

Short-term capital gain: If the asset is held for less than 36 months

At the prevailing income tax slab rates

Long-term capital gain: If the asset is held for more than 36 months

20% with indexation

Sale of gold ETF/gold mutual funds (debt-oriented) that were purchased after April 1, 2023

Irrespective of the holding period, the gains on the sale of such assets will be taxable as short-term capital gain

At the prevailing income tax slab rates

Source: Part I of First Schedule of the Finance Act, 2023 and Section 112 and 50AA of the Income Tax Act, 1961.

Additional surcharge and health and education cess is applicable on the above rates.

In case of conversion of physical gold to digital gold or vice versa, the date of acquisition of the new asset would be considered as the date when the original asset was purchased. Furthermore, such a conversion shall not be considered a 'transfer' for capital gains tax purposes.

 

Repatriation of funds

If you have invested in gold through an NRO account, then the gains from the sale of gold investments (like gold mutual funds, ETFs, digital gold, etc.) will be classified as capital income and can be repatriated up to USD 1 million annually cumulatively across asset classes. Dividends received on gold investments are classified as current income and can be repatriated freely. On the other hand, if the investments are made from your NRE account, you can repatriate the redemption proceeds (principal and gain, net of taxes) without any limits.

Conclusion

As an NRI, there are many ways for you to invest in gold in India, such as physical gold, gold ETFs, digital gold and gold mutual funds. However, you are not permitted to invest in SGBs. You should consult a tax expert to understand the tax implications of your gold investments.

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