HOW TO CONVERT PHYSICAL GOLD INTO E-GOLD

 

I India gold is not only an asset that Indian are invested as an asset class but also an emotion. Most Indians invest in gold in physical form. When we invest in gold in physical form it will hurt our economy in badly manner. As we know maximum amount of gold is imported. So it is directly linked foreign currency out go. That’s why over the years the government has been encouraging people to invest in the yellow metal in other forms. In 2015, it launched Sovereign Gold Bonds (SGBs).

In union budget 2023-24, the government has taken another push to encourage people to move over physical form of gold by removing the incidence of capital gains tax on conversion of physical gold to Electronic Gold Receipt (EGRs) and vice-versa. Through EGRs people can covert already purchased physical gold into electronics form. It is proposed that holding period for capital gains would include the time the physical gold was held prior to its conversion. Also, the cost of buying EGR shall be deemed the cost of gold paid for earlier.

Electronic Gold Receipt (EGRs): EGRs are held in demat accounts and traded on the exchanges in the same way as stocks. The government has approved the creation of a gold exchange to trade EGRs just like stocks are traded on BSE and NSE.

Process of conversion:

1.       Open a demat account with a trading member or depository with all the necessary documents.

2.       Deposit the gold bar or Coin with vault manager at a SEBI approved delivery location. The manager will assess the gold quality and scrutinise the paperwork.

3.       The vault manager will create EGR in multiples of 1gm and record the information on an interface shared by depositories, stock exchanges, vault managers and Clearing Corporation Of India Limited (CCIL).

4.       The manager will assign an International Securities Identification Number (ISIN) provided by the National Securities Depository LTD, to the EGR for trading on a stock exchange.

5.       CCIL will notify the stock exchange and depository of the change in EGR’s beneficial owner at the end of the trading day. The EGR is then listed on the exchange for trading.

6.       Likewise, you can convert EGR into physical gold by sending a request to the depository, which forwards the case to the vault manager, who, in turn, clears the gold delivery.

7.       Underlying gold can be removed from the vaults and returned in physical form when the holder wants.

8.       Gold deposited at one location and with one vault manager can be withdrawn from another area of the same or different vault manager if physical gold is available.

Although initiatives taken by the government is very much useful in our economy but the process is very document oriented. So it is very much difficult for common man to complete this process.