Gold Accumulation Scheme


Gold Accumulation Scheme

Gold Accumulation Plans (GAPs) are similar to conventional savings plans in that they are based on the principle of putting aside a fixed sum of money every month. The fixed sum then buys gold every trading day in that month. Like other unregulated investment schemes, there is an element of risk in joining various types of Gold accumulation schemes (Gold Purchase Plan) offered by jewelries. These types of gold purchase schemes are totally unregulated and highly risky.  Unlike banks and NBFCs which are regulated by RBI, jewelers do not fall under the purview of any of the regulatory body.  The investor may thus be left with limited recourse if they entrust large sums, especially to small and untrustworthy jewelers.  What happen if the price of   gold corrects? Jewelers without proper financial back-up may be put in difficult situation.


The Reserve Bank of India or other regulatory bodies needs to see this very seriously and bring such schemes under their strict supervision, otherwise the mushrooming of these schemes in the market will definitely lead to another big scam and the poor people will lose their hard earned money.

Gold jewelers typically offer two types of gold saving schemes. One is the option to save a flat amount every month for a fixed period. At the end of the period the customer gets to convert the money into equivalent value of jewellery. The second option is to have the monthly installment invested immediately in gold, at the prevailing price. At the end of the installment period the investor can convert it into their favorite piece of jewellery.  ( this is just like mutual fund SIP. Over a period of time the quantity of the gold will get accumulated and the cost of the gold get averaged (cost averaging).  At the end of the period the Jewelries will return the equivalent quantities of the gold ornaments.   But lot  of hidden costs are there like making charges, quality of the gold supplied etc. Another thing that needs to be considered is the risk while investing with a jeweller, especially ensuring that the jewellery is of the carat that was mentioned in the Terms & Conditions.


Other Features of Gold Savings Plan


·         Jewellery Accumulation Plan is a jewellery savings scheme that lets you invest in jewellery in a systematic manner

·        The scheme is introduced to the customers to facilitate advance payment through installments and get added benefits and bonus at the time of --- -purchase of jewellery after payment of all the installments.

·         However, customer is not entitled for any interest on the amount paid.

·         For Every monthly installment, Amount is credited to customer account in the form of gold

·         The monthly subscription must be paid continuously for 12, 18, 24 etc  months.

·         After having paid full months subscriptions, the  member will be permitted to take gold subject to the plan terms and conditions

·         In normal situation cash will not be refunded under any circumstances.

·         Defaulting members will be eligible for terminal benefits only after they have paid all the installments continuously.

·         Their eligibility of purchase will be postponed by the number of months they have defaulted.

·         The members who discontinue from the scheme before the completion of the  contact period,  they will be allowed to purchase only for the amount they had paid. No bonus and benefit will be credited.

·         Wastage and making charges will be levied as per the design of jewelry.

·         The scheme is normally applicable only for Jewellery not for Gold coins and Bars.

·         The price of the jewellery making  charges shall be charged on the actual rate at the time of delivery/maturity of the Scheme.

·         Customer will be issued a  Pass Book to record the installment paid and units of gold allotted.


India Post, the postal service department of government of India was announced a Gold Accumulation Plan in 2009.  This scheme was launched , in association with the World Gold Council and Reliance Money, a financial services company of the Reliance Group.  As per GAP, customers can purchase gold coins from selected India Post offices across the states in the country. “The GAP project ensures that people have the options like the Systematic Investment Plans of investing in gold by accumulating small quantities of the yellow metal.  I am not sure whether this scheme is working smoothly.  For more details please contact your nearest Post Office.  One thing I am sure that, this scheme is available only in few selected Post Offices.    If Post Office is offering such type of schemes, whey you wanted to go to private parties and lose your money,


There is not much advantage for an investor in building a corpus with a jeweller.  If someone want to accumulate cash to buy gold, they  can get better returns even if they invest in a  bank recurring deposit. Also, this gives the investor more control and guarantee. One can decide where to buy the gold from and for how much at their sole liberty.   A better option is to invest in gold exchange traded funds (ETFs).  The investor can buy gold ETF units in small quintiles for even Rs. 1,000/- and convert them to physical gold later as per their wish.  There is no lock in period. Gold ETFs are listed and very liquid also.


Gold ETFs - Gold Exchange Traded Funds (ETFs) have become quite popular in the last couple of years with a number of Mutual Fund companies in India launching this Exchange Trades Funds. In fact Gold ETFs are the most popular asset ETFs in India currently. The asset size of these ETFs has increased sharply with the increasing popularity of gold as an investment option. Gold ETF are like stocks listed on the stock exchanges any one can buy and sell these ETF just like shares.

Advantages of Investing in Gold ETF

  1. Purchases can be made in small denominations: An investor can purchase gold ETFs in small denominations. For example, one gold ETF unit represents one gram of gold, some funds its half gram (eg. Quantum Gold Fund). Therefore, an investor can even buy small amount of units at a time and then accumulate more units over time to shore up his investment.
  2. No worries about quality: When buying a gold bar or gold coin, a buyer has to make sure he buys it from a trustworthy source, lest he gets saddled with gold of lesser purity. There have been instances when one has paid for a 24K/10 gram gold coin and has got a lesser quality coins. This cannot happen in the case of a Gold ETF as an investor does not need to take physical delivery of the gold.
  3. Convenient resale: Since Gold ETFs are listed and traded on the exchange like other company shares, an investor can buy or sell units easily anytime during market hours. Try comparing this with the headache of selling a gold bar, coin or jewelery. An investor always tends to lose some amount towards making charges plus other deductions in case of jewelery and banks do not buy back gold coins, even when purchased from them.
  4. Hassle-free storage: In case of Gold ETFs, there is no hassle of storage as it is in demat form. In case of gold bars, coins or jewelry, one may have to hire a bank locker, which again comes at a considerable cost.
  5. Taxation Advantage: Physical gold needs to be held for three years or more to be eligible for long-term capital gains. If physical gold is sold before the stipulated period of three years then short-term capital gains tax will be applicable (the gain will be added to his/her total income). Comparatively, if Gold ETFs are held for less than a year, then the gains fall under short term capital gains. This means, that gains are clubbed with the overall income of the investor and depending on the tax slab he/she falls in, taxes will be applicable. Further, if the Gold ETF units are held for over 12 months; then the gains are classified as long term capital gains tax, where the investor will pay either 10% on the gain (profit) without indexation or 20% with indexation, whichever is lower.
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