Can NRIs Invest in Gold Bonds?

Gold is a good investment option. It is considered a safe-haven asset. Gold provides a solid cover during the time of rising inflation and unexpected market crashes. For non-resident Indians (NRIs), there are a few options for investing in gold. Physical gold, ETFs, and E-Gold are the primary ones.

Gold Bond Scheme

The Sovereign Gold Bond Scheme, launched by the Indian Government in 2015, is an attractive option for those who wish to avoid the hassle of safeguarding physical gold after investment in yellow metal. However, according to the Sovereign Gold Bond Scheme terms, only people residing in India can invest in the Gold Bonds as per Foreign Exchange Management Act, 1999.  

Besides them, HUFs, trusts, universities, and charitable institutions can invest in the Gold Bond. At the time of investment, the individual investor should be an Indian resident. They can subsequently change their residential status and become an NRI. In scenarios, the investor can hold the Gold Bond till early redemption/maturity.

The Sovereign Gold Bond Scheme allows nomination facility. An individual investor who is an Indian resident may appoint a non-resident Indian as their nominee. In that case, the NRI gets the security transferred to their name once the original investor passes away, provided that:

●   The Gold Bond Investment is held till early redemption or maturity

●   The redemption proceeds and interest from the investment does not get repatriated to India.

Additional Read: 10 Golden investment rules for first time earners

Is gold a good investment option for NRIs?

If you analyse the returns which gold has generated over the past few years, you notice that there are years when it had performed beyond expectations and times when it only fetched a small return.  Though gold may not generate a steady cash flow like stock, it is still a reliable asset you can lean on during economic uncertainty. It is beneficial in hedging your exposure during inflation.

Additional Read: Why Invest in Sovereign Gold Bonds?

NRI Gold Investment

As mentioned before, as an NRI you cannot invest in Sovereign Gold Bonds (SGB). If you had invested in Gold Bonds before the change in your citizenship status, you will continue to hold the investment until its maturity.

However, since you cannot invest in SGB, it does not mean that you cannot invest in gold through other means. The government has made several gold investment options available for NRI investors to invest in and make profits from. There are typically two ways to invest in gold – buying physical gold and digital investment, following are more details about the same.

Physical gold

Buying physical gold has been a long-standing tradition in India. Every auspicious occasion, be it Diwali or a wedding, is marked by the purchase of gold jewellery. Besides its cultural significance, for several years people have preferred buying gold for its incredible value and its safe-haven investment status.

You can buy gold ornaments of your choice from any jewellery brand in stores or online. You can also buy gold coins and bars. You can redeem these physical gold units whenever you wish to make ornaments or have a financial requirement to be met.

Digital gold

While buying physical gold units is easy, taking care of them can be challenging. You need to be careful with maintenance and assuring its security. Investing in digital gold is a feasible option here. You do not hold physical gold units but instead, invest in related financial instruments backed by gold. These instruments are of equivalent value as physical gold units. There are three digital gold investment options that every investor should explore. They are:

• E-gold – E-gold units were first introduced in 2010 by the National Stock Exchange (NSE).  They 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.

• Gold Funds – As the name suggests, Gold Funds are those Funds that have gold as their primary commodity. Gold Funds are an excellent addition to your portfolio and allow you to reap incredible returns.

• Gold ETF – Gold ETFs, are Exchange Traded Funds that have gold as their underlying asset. The ETF returns and associated risk is a replication of the gold’s ongoing value in the market. It is one of the finest passive investment options you can opt for.

Conclusion

Investment in the Sovereign Gold Bond Scheme is a limited option for NRIs. It is only possible if, at the time of the investment, the investor was an Indian resident. However, if you are an NRI who has been named as a nominee of the Gold Bond Investment, you can reap the benefits. Make sure to submit the necessary documents required for KYC compliance along with a copy of your passport.

Remember that gold supply worldwide is dwindling, so the earlier you start your investments in gold, the better are your chances.

FAQs

How much should you invest in gold?

Always follow the ‘never put all your eggs in one basket’ concept when investing. Create a diversified portfolio. This helps you maximise returns and mitigate associated risks. Generally, investing 5 to 15% of your investment sum in gold is ideal. You can always adjust this according to your financial capacity, investment goals and market conditions.

What are the tax implications associated with gold investments?

As an NRI investor, you are liable to pay taxes on gains made from selling gold units. In fact, holding gold units also draws wealth tax. If your gold unit value exceeds Rs 30 lakh in a financial year, you are liable to pay wealth tax on the same.

Is it possible to import gold to their country of residence?

When you are travelling back to your country of residence from India, you are allowed to import gold up to 1 kg with you. However, this facility can only be availed if the NRI has stayed for more than six in the foreign country.

What do you require to invest in digital gold?

To invest in digital gold be it E-gold, Gold Funds, and Gold ETFs you need a Demat Account to do so. The Demat Account is a depositary account that holds your securities and units in a secure and electronic format. If you wish to trade your gold units in the open financial market, you need a Trading Account for it.

You can open Demat and Trading Account with any stockbroker, like ICICI Direct. Generally, it is advisable to open both accounts with the same stockbroker to facilitate seamless investments.

What are the documents required for investing in gold in India?

You must keep your Know Your Customer (KYC) documents like PAN and Aadhar Card, handy to invest in gold in India. You may also be required to submit a copy of your passport. Submitting a copy of your PAN Card is mandatory for all gold purchases made above Rs 2 lakh.

Disclaimer:

ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.