The strike by jewellers in the country against the Union Budget proposals for higher duties and taxes on their trade continues, but analysts say the ground-level impact of these may not be much.
The Budget sought to double the tariff on gold bullion import from two per cent to four per cent, on non-standard gold from five to 10 per cent, and to impose a one per cent excise duty on unbranded jewellery. Plus, a one per cent TDS (tax deducted at source) for cash-based bullion and jewellery transactions above a certain amount, among other rises.
Jeweller-promoted schemes like Gold Saving could be impacted due to these higher prices. Tanishq and P N Gadgil are jewellers offering such schemes. These are similar to the recurring deposit schemes offered by banks and post offices, that allow you to save small amounts for different tenures. At the end of the term, you can buy gold jewellery of your choice worth the accumulated amount. Cash refund is not allowed.
Many local jewellers also offer such plans. The redemption on maturity is done at current prices. A higher price means the ability to purchase a smaller amount. For people, who have already put money in these schemes, the increase in duties will not have a huge impact, especially if you are in for the long term. “Those who invest or put in money for a shorter duration will have to pay the extra transaction charges, short term capital gains tax and so on, which will add to overall cost,” said Anjani Sinha, managing director and chief executive officer, National Spot Exchange.
This is because for those who hold on to their investments for a longer duration, say one or two years, the price fluctuation gets averaged out, he adds.
Sandeep Kulhalli, vice-president-retail, marketing and merchandise, Tanishq, says: “Customs duty on gold has been increasing every year. It gets covered due to the other reasons that push up the price of gold, such as inflation, rupee-dollar movements, crude (prices) and so on. A two per cent rise in customs duty this year will lead to the same thing. The rise will not be visible. One’s investments in the accumulating schemes will not be impacted too much.”
When you are redeeming these units and it amounts to more than Rs 2 lakh, the TDS on it is just one per cent of the amount, or Rs 2,000. Even this can be claimed as a refund at the time of filing your tax returns.
Over the past 12 months, the price of gold has gone up 34 per cent, for various reasons. It has risen from Rs 20,590 to Rs 27,630 per 10g. Mehul Choksi, chairman, Gitanjali Gems, believes this will be steady, unless something drastic happens globally. So, hold on and continue with your investments.
For those looking to invest in these savings schemes, the advice is the standard one. If you have the ability to put aside a certain amount into these without impacting your budget much, you can invest. Money put into these should be treated as an expense. “If you can afford it, you can indulge in it,” says Suresh Sadagopan, certified financial planner.
