NRI Gold Investment

Amongst numerous options for creating an investment portfolio, gold is one of the most likeable choices. Gold remains a preferred choice due to its unique characteristics of high liquidity and unaffected during inflation.

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An Overview - NRI Gold Investment

The rising gold rate in India opens up opportunities for NRI gold investment in India. On analyzing the rise and fall in the rates, it has been observed that investing in gold in any form as NRI gold bonds renders beneficial returns.

Investment Plans for NRIsInvestment Plans for NRIs

Since ancient times to the modern generation in India, gold has been a valuable commodity; this is the reason people have a high preference for gold as an asset class. Even for NRIs, it is the safest and profitable investment besides real estate investment. 

The NRIs can make investments in gold in the form of purchasing jewellery, bars, coins, ETFs-Exchange Traded Funds, NRI gold bonds, etc.

Why Gold is an Asset Class?

At the time of inflation when prices of currency based assets soar, investment in gold is the safe-haven asset, which gives good returns. It regains its value quickly at the time of economic crunch.  Another aspect is that it maintains its value at the time of inflation, unlike currency-based assets whose prices go high but decreases.

Gold investment is considered as a hedge against inflation, which means it delivers higher than inflation returns. In recent data, over the last 30 years, gold has generated an annualized return of 10%. Over the last decade, it has been 11%, whereas CPI Consumer Price Index has compounded at 6.3%. Thus, it shows that gold plays a hedge against inflation. 

Investment Plans for NRIsInvestment Plans for NRIs

How Can the NRIs Invest in Gold?

It has always been advisable from the experts that one should invest 5 to 15% of their total assets in gold. The growth in the rates of gold is significantly high, which creates a high potential for investment in gold from outside India. 

It is highly beneficial for NRIs to invest in gold due to its outstanding growth in its rates. NRI gold investment can be a valuable investment option. The following are the options available for NRIs to invest in gold:

  1. Investment in Gold in Physical Form

    Culturally, people in India always buy and collect gold in the form of jewellery. At the time of family events and occasions, buying, giving a gift and wearing gold jewellery is a tradition as it has an aesthetic appeal. Although it is attractive, it has some drawbacks as many households may not sell it when the price goes high; another problem is that metal wastage and making and melting charges may not be favourable.

    Buying bullion coins are advantageous as they come in various denominations from 2.5 grams to 50 grams with an international assay certification of its purity of being 24 karats pure gold. NRIs should buy it from the jewellers than from the bank because you can sell it back to the jeweller but not to the bank.

  2. Investment in Gold in Paper Form

    1. Gold ETF

      Gold ETFs are mutual funds that invest and take out value from them. For investing in Gold ETFs in India through the Stock Exchange, NRIs need to have a PINS account. They can buy it from fund house, but they essentially have to buy or sell in multiples of 1000 units.

    2. E-gold

      This is an excellent opportunity for NRIs looking for a small investment in gold. This can be done in smaller denominations of as low as 1 gram of gold and its multiples in Demat form. This gold investment scheme works similarly to equity shares, and it has high liquidity, no concerns for purity or storage costs.

    3. Sovereign Gold Bonds

      They are a convenient option if people want to buy gold digitally. The government of India has initiated this scheme with an interest rate of 2.5 % per annum; however, NRIs are not allowed to invest in these gold bonds. However, if they have already invested in these bonds before acquiring NRI status, they can hold it till early redemption or maturity.

    4. Gold Funds

      Gold funds are investment options in the form of bars in various gold mining and production companies. Investment in gold funds is much similar to investing in mutual funds.

Tax Implications on NRI Gold Investment

  1. Income Tax on Physical Form of Gold

    Selling physical forms of gold as jewellery, coins, and bars within three years of purchase is subject to short-term capital gains tax, and selling after three years of purchase, one has to pay long-term capital gains tax.

  2. Income Tax on Paper Gold

    Since NRI buys and sells Gold ETF units through Exchange, there are no TDS applicable in that case. So, an NRI investor can do a self-assessment at the time of filing the returns; however, TDS would be deducted if direct redemption happens with the fund house.  

  3. Wealth Tax

    Wealth tax applies to possessing gold. If an NRI has a wealth of more than Rs 30 lakh from assets in a financial year, he needs to pay tax. Assets comprise jewellery, bullion, furniture, utensils made of gold or any precious metal.

SIP Investment for NRIsSIP Investment for NRIs

How Can the NRIs Save Tax? 

While there are no export duties on taking gold out of India, import duties in the country of residence may be applicable. NRIs must check if the local laws permit the sale of gold in the country of residence and its tax implications. NRI gold investment is subject to income taxation laws, which they must be aware of.

Any capital gains taxes from the sale of other asset categories in India (like shares, mutual funds, etc.) can be offset against the tax losses against the gains from the sale of gold. As per tax laws, tax liabilities from long term capital gains can be offset only against capital gains, whereas tax liabilities against the sale of short-term capital gains can be offset against long-term or short-term capital gains.

NRIs can claim exemptions under Section 54EC by investing in Capital Gains Tax Savings Bonds. NRIs must check local tax laws applicable in the country of residence during tax planning.

Investment Plans for NRIsInvestment Plans for NRIs

Wrapping it Up

In the current pandemic situation, the Indian Stock market is totally in an unstable condition which adversely affects the Indian economy; given this, the investment advisers suggest including gold in the investment portfolio is beneficial.  

The yellow metal had been used as a currency ages ago, but today it represents status in society. Seeing how much worth it has in investing gold, as it is an asset class and hedge against inflation, NRIs are more inclined to make gold investments.

Past 5 Year annualised returns as on 01-06-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.

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