Golden Opportunities: The Benefits Of Investing In Gold And Essential Documents Required
Gold Investment: While gold does not provide regular income like stocks or bonds, it often offers significant advantages such as liquidity and inflation protection
Gold has long been regarded as a premier investment option, highly favoured in India due to its high liquidity and ability to counter inflation. Investors in India have a variety of ways to invest in gold, ranging from traditional physical forms to modern financial instruments. While gold does not provide regular income like stocks or bonds, it often offers significant advantages such as liquidity and inflation protection. Investors who do not require short-term funds might consider Sovereign Gold Bonds, while those needing liquidity can opt for gold ETFs and funds. Despite some drawbacks, the benefits of investing in gold often outweigh the disadvantages, making it a wise choice for many investors.
Duty cut
Finance Minister Nirmala Sitharaman in the Union Budget 2024 presented on Tuesday announced a reduction in the Long Term Capital Gains (LTCG) tax on gold investments from 20 per cent to 12.5 per cent. The holding period for gold investments to qualify as long term capital gains has been shortened from 36 months to 24 months. Additionally, the benefit of indexation for calculating LTCG on gold has been removed.
Following the recent duty cut, customers in India, the world's second-largest gold market, have flocked to jewellery stores to take advantage of reduced gold prices. This rush has resulted in a significant increase in demand for gold, especially with the wedding season approaching. Many customers are now purchasing heavier pieces of jewellery, which were previously unaffordable when gold prices peaked at Rs 74,000 per 10 grams.
Diverse Forms of Gold Investment
Gold investment can be pursued through several avenues, including purchasing jewellery, coins, bars, gold exchange-traded funds (ETFs), gold funds, and the sovereign gold bond scheme. While gold prices can fluctuate, these dips are typically short-lived, with gold consistently rebounding strongly. Once you've decided to invest in gold, it’s crucial to carefully choose the method that best suits your investment strategy.
Understanding Sovereign Gold Bonds
Sovereign Gold Bonds (SGBs) offer a secure way to invest in digital gold. Issued by the Reserve Bank of India on behalf of the Government of India, these bonds provide an assured annual interest rate of 2.50 per cent. Denominated in grams of gold, with a minimum unit of 1 gram, investors can invest up to 4 kg. These bonds have an eight-year tenure with an exit option available after the fifth year, offering hassle-free gold ownership without physical possession.
Why Invest in Gold?
Gold is an attractive investment for those prioritizing safety, liquidity, and profitable returns. Despite perceptions of volatility, gold often serves as a safe haven during uncertain times. Here are some key reasons to consider gold investment:
Inflation-beating: Gold returns typically align with inflation rates, making it a reliable hedge against inflation.
Liquidity: Gold investments offer excellent liquidity, allowing investors to quickly convert their holdings into cash.
Modern Gold Investment Plans
Investing in gold today goes beyond simply buying physical gold. Investors now have access to modern investment options such as gold ETFs and gold funds. Gold ETFs allow you to invest in gold without the need to store physical gold, as your investment is held in a Demat (paper) format. Gold funds, on the other hand, involve investing in gold mining companies.
Required Documentation for Gold Investment
Investing over Rs 2 lakhs in physical gold requires a PAN card. For gold ETFs, you need to open a brokerage account and a Demat account. Investing in SGBs requires KYC documents similar to those needed for physical gold purchases, such as Aadhaar, PAN, Voter ID, or Passport.
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