What are the tax implications of investing in gold?

I’m 60 years previous, retired and within the 30% tax bracket. I wish to put money into gold funds or purchase gold in my spouse’s title. What are the tax implications? How a lot gold ought to I’ve in my portfolio? I’ve 60% of my investments in fairness invested for the previous 10 years. What ought to I do?

—Name withheld on request

If you wish to put money into gold and may take into account lock-in (your 60% funding is in fairness and the steadiness is assumed to be in debt asset class, thereby you do have the mandatory liquidity), then sovereign gold bonds (SGBs) are one of the simplest ways to put money into gold. These bonds carry a hard and fast curiosity coupon of two.5% each year along with the returns supplied by gold. These bonds include a lock-in of eight years with an exit possibility after 5 years. If the bonds are held until maturity, the capital acquire earned doesn’t entice tax. However, the curiosity earned at 2.5% is taxable within the arms of investor as per their marginal price of tax. You ought to prohibit your publicity in gold to no more than 10% of your portfolio.

I’m 40 years previous. I’ve a private mortgage of ₹10 lakh. The excellent steadiness of ₹7 lakh needs to be paid within the subsequent 4 years. If I shut the mortgage early, I must pay an enormous penalty quantity. I’ve a lump sum of ₹5 lakh with me. I used to be considering that if I deposit the sum in an FD, I’ll earn an curiosity on it with no danger. Should I do that or prepay? How ought to I am going about my monetary planning? 

—Mukesh

If we plan to do the non-public mortgage reimbursement, there can be a prepayment cost of 4-5% of the excellent steadiness. But then you may be free from paying the month-to-month EMI and with the following 4 years to go, you may plan to take a position the identical cash to raised use and take into account beginning month-to-month investments. If you have a look at it, your financial institution deposit if you don’t repay the mortgage can be at 5-5.5% and the non-public mortgage value of borrowing can be Sep 11% and even larger. The distinction between the 2 is steep and it’s good in the event you prepay the mortgage.

Surya Bhatia is managing companion of Asset Managers.

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