A Complete Guide to The Gold Deposit Scheme

The Gold Deposit Scheme (GDS), also known as the Revamped Gold Deposit Scheme (R-GDS), was introduced by the Government of India to utilise the gold held by households and institutions, which often remains idle.

As one of the world’s largest consumers of gold, India launched this scheme in 2015 to support the country’s economic growth. Under the R-GDS, you need to deposit a minimum of 30 grams of gold with participating banks. 

The deposited gold earns income through interest rates, depending on the bank and the chosen tenure.

Understanding the Gold Deposit Scheme

The GDS is a government-backed scheme that enables you to deposit unused gold into a designated bank account. The gold is then sent to a refinery, where it undergoes verification, melting, and hallmarking. A valuation is presented afterwards, and you have the option to accept or reject it.

Upon accepting the valuation, the bank usually issues a gold deposit certificate within 90 days. In case of rejecting the purity valuation, you have to pay nominal charges to retrieve the gold. 

Once deposited, your holdings earn interest of approximately 2%–3% for a tenure of up to 15 years. At maturity, you receive the funds in equivalent gold weight or cash, based on the current market price. 

For instance, for a Karnataka resident, the final redemption value corresponds to the prevailing gold price in Karnataka on the maturity date. This scheme allows you to benefit from advantages such as the safety of physical gold, reasonable returns, and liquidity. 

Advantages of Investing in the Gold Deposit Scheme

Other than making your gold a productive asset, GDS offers several additional benefits. These include wealth protection, tax efficiency, and flexible tenure options. Some key advantages are outlined below:

• Investing in gold earns you a guaranteed annual interest of 2-3%.

• The bank safeguards your gold in secure vault warehouses, removing risks of burglary, insurance expenses, and regular handling concerns.

• You may select deposit maturities ranging from 1 to 15 years. You have the option to receive the final value at maturity or withdraw early. Repayment can be in cash or an equivalent weight of purified gold.

• Interest earnings are exempt from tax, and capital gains liability upon redemption is removed. This enables your returns to accumulate over time, with the added advantage of tax exemptions on interest and capital gains, making it a more tax-efficient investment than physical gold.

• Gold’s resilience during economic crises helps maintain your purchasing power and preserve liquidity at current market prices.

• Your investment contributes to reducing India’s dependence on gold imports and supports the sustainable utilisation of assets. 

Eligibility for the Gold Deposit Scheme

Before opting for the GDS, you need to ensure it meets its reliability requirements. The scheme supports a broad range of Indian entities, allowing you to convert your gold into a productive asset. Some of the eligibility criteria include:

• The minimum weight of your gold deposit needs to be 30 grams. There is no upper limit on the gold weight.

• Individual Residents (including Minors): Indian residents applying singly, jointly, or on behalf of a minor can participate. A legal guardian is required for any applicant below 18 years of age.

• Hindu Undivided Families (HUFs): You may enrol the collective gold holdings of your HUF.

• Registered Trusts and Charitable Institutions: Ownership or management of a charitable or religious trust qualifies you for the scheme.

• Companies, Firms, and Other Registered Businesses: Organisations registered in India can deposit gold and earn annual interest.

• Government and Government-Owned Entities: Representation of a central or state government department or a fully government-owned entity is eligible to invest in the scheme. 

Steps to Invest in the Gold Deposit Scheme

To convert your gold into an interest-earning asset, you need to follow a specific application process. By completing each step carefully, you can ensure your deposit is accepted, assessed, and certified efficiently. The general steps to follow are:

1. Select an Authorised Bank: Identify a bank approved to offer the GDS. Verify its current interest rates, minimum deposit weight, and applicable service charges.

2. Prepare Your Holdings: Gather your gold in the form of coins, bars, or jewellery, removing any non-metal attachments. Clean and document the approximate weight of each item and collect proof of purchase.

3. Present the Gold for Assessment: Visit the designated branch where technicians will melt, test, and hallmark the gold. You will receive a valuation, which you need to accept or decline.

4. Complete the Application: Upon accepting the valuation, complete the application form and submit standard KYC documents. The bank will open a Gold Deposit account in your name and record the verified weight.

5. Receive the Deposit Certificate: Within 90 days, you will receive an official deposit certificate specifying the refined weight, tenure, and interest rate.

You need to retain this deposit certificate, as it serves as proof for future interest credits and during the final redemption. The GDS offers a reliable way to earn returns on your idle gold assets while supporting the nation’s economic development. 

By depositing gold, you benefit from stable interest rates, tax exemptions, and the elimination of risks related to physical gold storage. However, certain limitations apply to the GDS. The gold deposit scheme requires a minimum deposit of 30 grams of gold, which may pose a challenge for smaller investors.

Premature withdrawal attracts penalties, especially if done before the one-year lock-in period. With a well-planned strategy and sound decision-making, this scheme can prove advantageous both for you and the Indian economy.