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What is a Gold Savings Scheme: Benefits & How It Works

Indians have always valued gold, not only as a valuable metal but also as a representation of tradition, heritage, wealth, and security. It is given a special place in homes and forms an integral part of celebrations, whether it is a wedding, the arrival of a child, festivals, or even a means to invest excess funds in a good manner. India remains the world's largest consumer of gold and also the second-largest central bank purchaser of gold.

Yet in the recent past, rising prices of gold have rendered it tougher for people to make money worth of gold buying all at once. Buying gold at a lump sum amounts to burning through hard-earned cash for a majority of people. Gold saving schemes, floated by banks, financial companies, and even big-time jewellery chain stores, prove to be the perfect answer with its common man-friendly formula where a customer deposits periodic sums by means of tiny portions on agreed periods of time.

At the end of the savings period, the money saved can be utilized to purchase gold, usually with some extra advantages such as bonuses or discounts. Such schemes bring gold within reach and enable individuals to plan their purchase without financial stress. If you are thinking of purchasing gold through a savings scheme, this article will assist you in knowing how these schemes function and what you should keep in mind before committing yourself.

How Does a Gold Saving Scheme Work?

To understand a year's gold saving scheme, let's have a simple example. A gold savings scheme by jeweller Hamara Gold. Under this scheme, customers can pay fixed monthly installments for one year and will get a bonus of one month's installments at the end.

  • Monthly Deposit: ₹4,000

  • Tenure: 12 months

  • Bonus: 1 month's payment (₹4,000)

Let's assume 36-year-old home maker Malati subscribes to this scheme. She pays ₹4,000 per month for 12 months, which amounts to ₹48,000 (₹4,000 x 12). On successful culmination of the scheme, the jeweller gives her a bonus equal to a month's installment, i.e., ₹4,000. Malati now has ₹52,000 to buy gold although she paid ₹48,000. The bonus actually boosts her buying power without paying an extra out-of-pocket amount.

Benefits of Investing in Gold Saving Schemes

Let’s take a closer look at the benefits you can expect with a gold-saving scheme:

  1. You Get To Customise the Tenure

    Most gold savings schemes offer flexible durations, typically ranging from 6 to 12 months, allowing you to choose a plan that fits your financial goals and timeline.

  2. It is an Affordable Commitment

    These schemes often have a low starting point, with some plans beginning at just ₹1,000 per month, making them accessible to a wide range of investors.

  3. You Can Expect Attractive Rewards 

    Many jewellers offer perks such as a bonus equivalent to one month's installment, discounts on making charges, or additional contributions at maturity.

  4. The Redemption Can Be the Way You Want

    The accumulated value can usually be redeemed against jewellery purchases. While some entities allow purchasing coins, you always have the option to choose from a wide selection of ornaments.

  5. Digital Convenience

    Leading jewellers now provide online transactions and account management, offering a seamless and transparent investing experience without visiting a store.

  6. Gold is a Time-Tested Asset Class

    Gold has consistently maintained its value through economic slowdowns and inflation, making it a dependable store of wealth and a safe-haven asset.

Comparison: Gold Savings Scheme vs Gold ETFs vs SGBs

Today, the market offers you several ways to invest in gold. Here’s a detailed comparison that can help you make a well-informed decision. 

Feature

Gold Savings Scheme

Gold ETFs

Sovereign Gold Bonds (SGBs)

Provider

Jewellers

Mutual Fund Houses, Stock Exchanges

Government of India (via RBI)

Investment Mode

Monthly deposits (fixed amount)

Purchase through demat account or broker

Issued in tranches; via banks or online platforms

Returns

Bonus/discount on jewellery purchases

Market-linked returns based on gold price

Fixed 2.5% interest p.a. + gold price appreciation

Liquidity

Redeemable only at jeweller in jewellery form

Highly liquid; tradable on stock exchanges

8-year term; early exit after 5 years (or tradable)

Physical Gold Involved

Yes, at redemption

No, purely digital

No, certificate-based

Storage/ Safety

Stored by jeweller till redemption

Safe, held in demat

Safe, no storage required

Usage

Jewellery purchase only

Investment purposes

Investment & interest income

Tax Implication

No capital gains; GST on jewellery applies

LTCG tax after 3 years

No capital gains tax on maturity

How to Choose the Right Gold Saving Scheme?

Selecting the appropriate gold savings plan involves more than just selecting the most well-known one. It is important to assess the finer points depending on your objectives and level of financial comfort. The following are some important factors to examine:

  1. Carefully Analyse the Duration and Flexibility

    Check how long the plan is for and whether it fits your needs, especially if you are saving for a specific event. Check also if there is some flexibility to stop/ pause or withdraw before time in case of an unexpected expense.

  2. Look Out for Perks and Rewards

    Most plans have benefits like a bonus month absolutely free or discounts on making charges. These small things can actually contribute a lot to your total value, so check them across plans.

  3. Opt for Plans with Ease of Payment

    Choose a plan where payment is easy through your favorite modes, auto-debit, UPI, credit/debit cards, or digital wallets.

  4. Check the Jeweller's Reputation

    This is extremely significant. Choose a well-known jeweller. It assures you the genuineness of gold, proper documentation, and good customer service.

  5. Do not Compromise on Clarity on Rules

    Don't ignore the small print. Know what if you fail to make a payment or take money out prematurely. Don't shy away asking if you have some questions in your head, or if you have some reservations. Being open on the terms in advance prevents issues later on.

Steps to Enroll in a Gold Saving Scheme

Starting your journey with a gold investment plan is simple and rewarding, especially if you’re looking for a structured way to buy gold over time. Here’s a general guide to help you begin:

  1. Explore Your Options

    Begin by researching various gold saving schemes offered by trusted jewellers or financial institutions. Compare features, benefits, and customer reviews to find a plan that aligns with your goals.

  2. Set a Monthly Budget

    Decide how much you can comfortably set aside each month. Many plans allow you to start with as little as ₹1,000, making them accessible to a wide range of investors. Check with your jeweller for all such details beforehand.

  3. Choose and Enroll

    Once you've selected a suitable scheme, complete the enrollment process either online or at a store. Make sure you understand the terms and conditions before committing.

  4. Monitor Your Progress

    Track your monthly contributions and stay informed about current gold rates. This will help you plan your redemption wisely.

  5. Redeem When Ready

    At the end of the tenure, use your accumulated savings to purchase gold jewellery or coins, possibly with added bonuses or discounts.

Conclusion

In India, gold is more than an investment; it signifies prosperity, tradition, and auspiciousness. Gold saving schemes are ideal for individuals who want to plan their gold purchases in advance and avoid the burden of a one-time payment, while also gaining extra value on their savings. By allowing small, regular deposits, these schemes make it easier for people with fixed monthly incomes to plan ahead for future gold purchases, whether for weddings, festivals, or investment.

Aside from being affordable, these schemes have the advantage of disciplined savings, similar to life insurance policies which encourage regular planning. They link the long-term value and safety of gold to the convenience of monthly contributions, thus being a low-risk goal-oriented investment. Whether you plan to create a corpus of gold or hedge against price volatility, gold saving schemes provide a formal, predictable means of acquiring this ageless commodity. 

As recommended with every investment, make sure to weigh the pros and cons of gold-saving schemes as well. Do your homework and make a well-informed decision, keeping in mind your objective and your budget!

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The information provided on this website is for general informational purposes only and is subject to change without prior notice. BFSL shall not be responsible for any consequences arising from reliance on the information provided herein and shall not be held responsible for all or any actions that may subsequently result in any loss, damage and or liability. Interest rates, fees, and charges etc., are revised from time to time, for the latest details please refer to our Pricing page.

Neither the information, nor any opinion contained in this website constitutes a solicitation or offer by BFSL or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.

BFSL is acting as distributor for non-broking products/ services such as IPO, Mutual Fund, Insurance, PMS, and NPS. These are not Exchange Traded Products. For more details on risk factors, terms and conditions please read the sales brochure carefully before investing.

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