With Dhanteras being just around the corner, it’s that time of the year again when people buy gold and other metals to bring in prosperity for their families. However, the price for the yellow metal is near its all-time peak this time around, which might trigger a slowdown in the demand for the coveted metal. So, if you are planning to go ahead with your annual gold-buying ritual, here are a few things that you should keep in mind:
Do Not Forget To Check The Purity And Hallmark
The purity of gold is measured in carats. Usually, gold jewellery is made with 22K gold. Gold coins and gold biscuits, on the other hand, are usually purer and are made with 24K gold. It should also be noted that precious stone-studded jewellery is usually made with 18K gold. In addition to that, always make sure that you check the hallmark on the gold. If a piece of jewellery has the BIS mark on it, you can stay rest assured that it is in line with the standards that have been set by the Bureau of Indian Standards.
Other Charges Which Apply To Gold Jewellery
You should keep in mind that the price of gold is not the only expenditure that you will have to bear in case of physical gold. You’ll also have to consider making charges which can be 8% of the gold price if not more, a 3% GST on the value of gold and a 5% GST on making charges.
Terms For Buyback Of The Gold
Whether you purchase your gold from a local jeweller, the Stock Holding Corporation of India, a non-banking financial company or online, check the options of buyback with the seller. It should be kept in mind that gold coins which are purchased from a bank cannot be sold back to the bank as per the directives of the Reserve Bank of India (RBI). On the other hand, if you are selling your gold (in any form) to a jeweller, you are likely to get a lower valuation for the same as the jeweller will not pay for the making charges and the administrative charges.
Investing In Gold
The yellow metal is considered to be a good hedge against inflation, hence it’s also a favourite investment tool for many. However, you should not go overboard with your gold investments due to its stagnating prices for long durations. Experts suggest gold investments should ideally not exceed 10% of your investment portfolio. That being said, when investing in gold, do check out some alternatives to physical gold to immune your finances from concerns over purity and safety.
Sovereign Gold Bonds: Reserve Bank of India’s gold-denominated bonds offer guaranteed interest income of 2.5% compounded every 6 months and their returns are completely tax-free when redeemed after the maturity of 8 years. However, investors can redeem them after the fifth year itself. The latest tranche of SGBs can be subscribed between October 21-25 and the bonds will be issued on October 30.
Gold Mutual Funds: Investors can also go for Gold Mutual Funds and invest in lump sums or through the Systematic Investment Plan route according to their convenience. Gold MFs returns are linked to the fluctuations in the yellow metal’s prices. Do note that returns for units held for less than 3 years are considered short-term capital gains and taxed according to the applicable income tax rate, while returns held for more than 3 years are considered long-term capital gains at taxed a flat 20% rate plus cess with indexation benefit.
Digital Gold: These days you can also buy digital gold from authorized vendors and producers and steer clear from storage concerns. You can also buy gold digitally in super-small quantities through mobile applications for as cheap as Rs. 1. You can redeem the gold by selling it back or converting it to physical gold. However, do the due diligence before investing in digital gold and make informed calls as this is still a largely unregulated product.
The author is CEO, BankBazaar.com
BankBazaar.com is India’s leading online marketplace for loans and credit cards.