Gold savings schemes are becoming a popular option for people planning to buy jewellery. Offered by many Indian jewellers, this scheme allows investors to buy gold in monthly payments. Jewellers usually allow investors to purchase gold with equal monthly payments for 11 months while the gold for the 12th month is usually offered as a bonus for free.
Under the scheme, the minimum monthly payment usually starts from Rs 1,000. After completing the tenure, customers can use the accumulated amount or eligible gold weight to purchase jewellery. In addition, many jewellers also provide heavy discounts on making charges for scheme holders. This can help reduce the final jewellery bill.
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Why Is This Scheme Popular?
One of the main attractions of this scheme is the 12th-month benefit. Customers pay a fixed amount every month for 11 months. The jeweller then adds the 12th month's gold value for free.
But is it really free? The actual benefit depends on the scheme's terms, gold pricing, redemption rules and other charges.
What To Check In Such Scheme
- Redemption limits: You must understand that the 12th month bonus can usually only be used to buy jewellery from that jeweller. It is usually not redeemable for coins, bars or cash. Many schemes require you to spend at least the full scheme value, sometimes more.
- Taxes and charges: Purchasing gold in India attracts 3% GST. For jewellery, you also need to pay making charges that can range from 5% to 25% or even more. If your jeweller is not providing you with a discount, you need to be prepared for the taxes and additional costs. These charges can increase the final bill and effectively cancel out the 12th month free gain.
- Price risk: In such schemes, you hold rupees and not gold. If gold prices keep rising during the 11-month period, your fixed monthly amount may buy less gold. This means you could end up getting lower gold weight than expected when it is time to redeem.
- Counterparty risk: Your deposits are essentially an unsecured loan to the jeweller. Such schemes are also usually not regulated by any government entities such as the Reserve Bank of India. Entering into such schemes with non-established businesses poses fraud risk.
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