NRI Investment in Gold in India – Investing in gold has long been seen as a secure and valuable strategy, especially for Non-Resident Indians (NRIs) looking to diversify their portfolios and hedge against inflation. However, before making any gold-related investments in India, it is crucial for NRIs to understand the regulatory framework under FEMA (Foreign Exchange Management Act), the tax implications, and the investment options available.
1. Understanding Gold Investments for NRIs
Gold continues to be one of the most trusted forms of investment in India due to its stability and wealth preservation potential. NRIs can invest in gold through various channels:
- Physical Gold – Includes jewellery, coins, and gold bars
- Gold Exchange-Traded Funds (ETFs)
- Digital Gold
- Gold Mutual Funds
2. FEMA Guidelines on NRI Gold Investments
a. Gold ETFs
Gold ETFs offer investment in gold in a dematerialised form. Each unit typically represents 1 gram of 99.5% pure physical gold. These ETFs are traded on the NSE and BSE, offering price transparency similar to equity stocks.
- Can be purchased using funds from NRE or NRO accounts
- Transactions must be made through a Non-PINS account
- A demat and trading account is required
b. Digital Gold
Digital gold allows investors to buy gold online, which is backed by 24 karat physical gold.
- Tradeable on National Spot Exchange Limited (NSEL)
- Requires a demat account with a registered broker
- Can be stored digitally or redeemed for physical gold
c. Gold Mutual Funds
These are fund-of-fund schemes investing in physical gold, gold ETFs, or related assets.
- Available through fund houses, banks, or brokerage firms
- Requires a demat and trading account (for digital form)
- Can be purchased using NRE or NRO accounts
- Investments must be done through a Non-PINS account
d. Physical Gold
NRIs can buy gold jewellery, coins, or bars. However, purchases must be made through an NRO account.
Note: NRIs are not eligible to invest in Sovereign Gold Bonds (SGBs). If an NRI held SGBs while being a resident, they can continue to hold them. However, the interest and maturity proceeds are non-repatriable.
3. Repatriation Rules for Gold Investments
From NRE Account:
- Investments made via an NRE account in Gold ETFs or Gold Mutual Funds are fully repatriable.
From NRO Account:
- Investments made via an NRO account are non-repatriable beyond the overall limit of USD 1 million per financial year, subject to applicable documentation.
4. Tax Implications on Gold Investments
a. Gifts and Inheritance
- Gold received as a gift or inheritance from relatives (as defined under Section 56 of the Income Tax Act, 1961) is not taxable.
- If gold is received as a gift from non-relatives and its value exceeds ₹50,000, the entire value is taxable under the head “Income from Other Sources.”
b. Capital Gains Tax on Sale of Gold
| Type of Asset | Holding Period | Tax Treatment | Tax Rate |
|---|---|---|---|
| Physical Gold / Digital Gold / Gold Mutual Funds (Debt-oriented) | Less than 24 months | Short-term Capital Gain (STCG) | Taxed as per income tax slab |
| More than 24 months | Long-term Capital Gain (LTCG) | 12.5% without indexation | |
| Listed Gold ETFs | Less than 12 months | Short-term Capital Gain (STCG) | Taxed as per income tax slab |
| More than 12 months | Long-term Capital Gain (LTCG) | 12.5% without indexation |
Conclusion
Gold investments offer NRIs an effective way to secure their wealth and diversify their portfolios. However, careful attention must be paid to FEMA compliance, repatriation rules, and tax liabilities. Whether you’re considering digital gold or mutual funds, always consult with a qualified financial advisor or tax consultant to ensure your investments are both profitable and compliant.
Disclaimer
The information provided in this blog is for general informational purposes only and does not constitute legal, tax, or investment advice. Readers are advised to consult with qualified professionals for personalized guidance based on their individual financial situations and objectives. The regulations and tax laws mentioned herein are subject to change and may vary depending on jurisdiction and time.