Can NRIs Invest in Gold?

Can NRIs Invest in Gold?

Yes. NRIs, like other resident citizens, can invest in gold.

In India, gold as an entity has very high regard and is a must-have in your investment portfolio. Investment in gold not only diversifies your portfolio, but it mitigates risk, as well.

Why Investing in Gold is a Safe Bet for NRIs

If you take note of past trends, during severe Sensex crashes, gold still managed to buffer the overall portfolio loss by acting as a cover.

Gold is a preferred investment due to its high liquidity and inflation-beating capacity. NRIs across the globe can invest in gold and reap the benefits from the exponential growth in its rates over the years.

An NRI can invest in gold in various forms such as buying jewelry, bars, coins, gold funds, Exchange-Traded Funds (ETFs), Sovereign Gold Bond Scheme (SGBS), and much more.

Buying Gold in India vs Importing Gold

NRIs can legally import up to a kilogram (about 2.2 pounds) of physical gold in the form of bars, coins, and jewelry during a visit to India. The pre-condition here is that they must have been abroad for more than six months. Importing gold into India on shorter visits of 30 days or less is also possible. In either case, this import is, subject to import duty. There are exceptions, though: Men are allowed to bring in duty-free gold worth ₹50,000, and for women, the limit is ₹100,000.

NRIs will have to declare the gold on arrival and pay 4% of the notified value in case of bars marked with a serial number, weight, and manufacturer’s name. For jewelry or other kinds of physical gold, the duty can go up to 10%. The duty value is determined by the government from time to time.

What are Gold ETFs and Gold Funds?

To invest in gold ETFs in India, you must have a Demat account. Buying a gold ETF is similar to buying actual gold, but you don’t buy it physically. It is stored in paper form in your Demat account.

On the other hand, gold funds are investments in the form of bars (bullions) in various gold-mining companies.

What Are Sovereign Gold Bonds?

The safest way to buy gold digitally is through Sovereign Gold Bonds (SGB).

Note: An NRI can’t buy SGBs. If, however, a person is an Indian resident at the time of buying SGBs and then becomes an NRI, he/she can continue to hold the SGBs till maturity or early redemption.

The bonds are issued by the Reserve Bank of India (RBI) on behalf of the Government of India with an assured interest rate of 2.50% per year.

An individual can invest in about 4 kilograms worth of gold (about 8.8 pounds) via Sovereign Gold Bonds. The SGBs have a tenure of eight years with an exit option from the fifth year onwards.

SBGs are the best ways of investing in gold without buying gold physically.

Documents Needed to Buy or Invest in Gold or Gold Funds in India

  • PAN Card for investments in actual gold above ₹2 lakhs.
  • To invest in ETFs, NRIs need an account with a brokerage firm and a Demat account with the same firm.
  • For SGBs, the KYC requirements include documents needed for buying physical gold and a copy of your passport.

Gold Investments in India Incur Taxation

Different gold investments in India attract different taxes.

  • Tax on buying gold: You will have to pay 3% GST along with any making charges.
  • Tax on sale of gold: It is taxed on a short- and long-term basis. The minimum holding period for gold is 3 years. If you sell the gold within 3 years of buying it, the taxation will be on a short-term basis. If you sell the gold after 3 years, it will attract the long-term taxation slab.

Buying gold in the non-physical form has a lot of benefits for NRIs. Let’s explore:

  • Purity: ETFs and Funds invest in pure quality gold or gold-producing companies; hence, you do not have to worry about purity.
  • Liquidity: ETFs and Funds can be sold easily, unlike actual gold.
  • No security required: All gold holdings are in either paper or Demat form; hence, no extra security is required.
  • Taxability: After holding ETFs and Funds for three years, they qualify as a long-term investment. On selling them, the NRI will have to pay long-term capital gains tax at the rate of 20% of the gains.

Also, if the ETFs are sold in exchange, tax will not be deducted at the source for NRIs. A self-assessment has to be done when filing tax returns.

As has been already established, gold has inflation-beating capabilities and is a good option when considering liquidity. It means that you can get instant funds by exchanging gold.

As an NRI, investing in gold is a good move towards a secure future.

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