 "Gold buying: Can NRIs invest in the yellow metal? Here's a detailed guide")
Festive seasons, especially Diwali is the time when several Indians purchase gold, whether as an investment or as a gift for loved ones. This enthusiasm extends to non-resident Indians (NRIs) as well who are either living away from their home or those who are visiting after a long period.
Gold, considered a safe-haven asset, offers a compelling investment prospect, especially in periods of inflation and unforeseen market turbulence.
Notably, the price of this precious metal has recently experienced a significant upsurge, reaching nearly $2,020 per ounce in global markets in October. This surge can be attributed, in part, to geopolitical tensions in the Middle East. In India, gold has been trading at approximately Rs 60,921 per 10 grams.
NRIs are provided various choices to invest in Indian Gold, either through a cultural method like holding gold physically or through modern methods such as E-Gold, Gold Mutual Funds etc. NRIs cannot invest in gold through the SGB scheme once he achieves their NRI status. But. If an NRI had invested in SGB before he got his status as an NRI, then he can hold the bond till the date of its maturity.
How NRIs can invest in gold in India?
“NRIs can invest in gold in India in various forms, including physical gold, gold ETFs, and gold mutual funds. However, there are certain restrictions on NRI investment in gold, primarily due to the Foreign Exchange Management Act (FEMA), 1999,” said Sandeep Bajaj, Advocate, Supreme Court.
According to the Sovereign Gold Bond (SGB) Scheme terms, only people residing in India can invest in the Gold Bonds as per the FEMA 1999.
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According to Sandeep Bajaj, the RBI restricts NRI investment in SGBs to maintain domestic liquidity and control gold imports.
SGBs are designed to encourage domestic investment in gold and reduce the demand for physical gold imports. Allowing NRIs to invest in SGBs could increase the demand for gold and put pressure on the country's foreign exchange reserves.
SGBs are designed to encourage domestic investment in gold and reduce the demand for physical gold imports. Allowing NRIs to invest in SGBs could increase the demand for gold and put pressure on the country's foreign exchange reserves.
“NRIs have been disallowed from applying for SGBs, however, persons who had applied while they were residents in India are allowed to hold it till their maturity,” said Shashank Agarwal, Advocate, Delhi HC.
Meaning, while investing, the investor must be an Indian resident. However, they can subsequently change their residential status and become a non-resident Indian (NRI). In such situations, the investor has the option to retain the Sovereign Gold Bond until its early redemption or maturity.
The Sovereign Gold Bond Scheme also offers a nomination facility, allowing an individual investor, who is originally an Indian resident, to designate an NRI as their nominee. Under this arrangement, if the original investor passes away, the NRI nominee can have the security transferred into their name, provided that, the Gold Bond investment is held until early redemption or maturity and the redemption proceeds and interest earned from the investment are not repatriated to India.
Investment in other forms of gold
, NRIs can purchase all other forms of gold barring SGBs. They can buy gold ornaments from any jewellery brand in stores or online. They can also purchase gold coins and bars.
However, as an NRI investor, you are subject to taxation on the return from the sale of gold units. Additionally, if the value of your gold units exceeds Rs 30 lakh in a given financial year, you are obligated to pay wealth tax on the accumulated wealth.
Further to invest in digital gold be it Gold Funds, Gold ETFs or E-gold you need a Demat Account. A Demat Account is a depository account that holds your securities and units in an electronic format.
E-gold units, introduced in 2010 by the National Stock Exchange (NSE), are gold units that are listed and can be traded on the stock exchange. One E-gold unit’s value is equivalent to the value of 1 gram of gold.
How much gold can NRIs bring into India?
“A person who is residing abroad for over one year is allowed to bring gold, free of duty in his bonafide baggage up to 20 grams with a value cap of Rs.50,000/- (in case of a gentleman passenger) or up to 40 grams with a value cap of Rs.1,00,000/- (in the case of a lady passenger),” said Advocate Sandeep Bajaj.
Gold exceeding these limits will incur customs duty.
“As for taking the gold out of India, there are no restrictions per se, however, the destination of such gold will determine the amount of gold that one can carry out of India,” noted Advocate Shashank Agarwal.
Taxation and gold
Taxation and gold
NRIs must check the tax implications before investing in gold in India. As per Wint Wealth, if an NRI sells the physical gold within three years of purchase, then the short-term capital gain tax would be applicable, and if it is sold after three years of its purchase, then it would be subject to long-term capital gain taxes.
If NRI purchases and sells Gold ETFs directly through stock exchanges, no TDS would be deducted, but if Gold ETFs are traded through mutual fund houses, TDS would be applicable.
If NRI purchases and sells Gold ETFs directly through stock exchanges, no TDS would be deducted, but if Gold ETFs are traded through mutual fund houses, TDS would be applicable.