Everything You Wanted to Know About Bullion but didn't Know who to Ask

Hello, Friends. This is Vijay Bhambwani here.

In this video, I am going to answer a lot of queries that I have received from my dear viewers on many, many videos that I have made on gold and silver. Let's call them bullion, collectively, on physical buying in bullion.

You may have many queries and some of you have asked in comments. Equitymaster subscribers have sent in queries via customer support. So I am going to dedicate this video to answering as many questions as I can to the best of my abilities. I hope I am able to solve many of your problems and queries and probably even misconceptions about gold.

Before I begin two caveats. Number one. I am not a practising income tax practitioner. I'm basically an investor. So please consult your chartered accountant or qualified person before you take action on investment delivery in gold and taxation issues etc.

Number two. Many of my viewers have asked for references of reliable sellers, distributors, wholesalers of gold, and I am going to provide you some names. But many of these are people I have no financial dealings with, and these are reputed names in Zaveri Bazaar and therefore one can assume that you will get a fair deal.

Of course, you're going to ensure what I have already told you in my earlier video: How not to get cheated while buying gold. So, all those safeguards will have to be taken by you as default. I'm going to take each of the queries one by one.

The first and most important and oft repeated query by many of my viewers is Vijay, how much gold can I buy and if I buy too much, will the government take away my gold?

Now I remember I switched on my television in the evening on first of December 2016, and what I saw on the ticker on financial television channels was something that I got confused, admittedly, even myself.

So, there was this item which was being flashed across on television channels that an Indian unmarried woman above the age of 18 can have 250 grams of gold. An Indian married woman above the age of 18 obviously can hold 500 grams of gold. And an Indian male married or unmarried, above the age of 18 of course, can have 100 grams of gold.

Now a lot people think that this is hard top or an absolute limit to how much gold and average Indian citizen can hold. This is absolutely wrong. I'll clarify this.

You see, this is the amount of gold that you can hold without having proof of purchase. By proof of purchase meaning a bill. An invoice. You might have either got it as stridhana, which is a gift to a woman from her parents or even her in laws. You could have inherited it from your sisters, and you might have even wanted as a gift in earlier years. And you do not have any proof of purchase. So this is the amount of gold that you can hold without having to prove where you have got it from.

Even here there is a slight grey area that the IT department, the assessing officer will at his own discretion, determine whether the person belongs to a community where giving and taking a lot of gold as gifts either at the time of marriage or otherwise, you know, when a couple is blessed with the child or whatever, whether there is a custom to give and take a lot of gold. Then the assessing officer might give you a certain more leniency in the amount of gold that you are having in your house.

This is the amount of gold that can never be confiscated, even in the unfortunate case of an IT raid or visit by the income tax guys. Not that I'm saying that it happens, but I am saying that if this is the query that you had, this is the amount of gold, 100 grams for a male, 250 grams for a spinster, 500 grams for a married woman, you can own without any proof of purchase.

If you are buying afresh and you are paying for this gold by any proof of a payment, digital online transfer, cheque, credit card, where there is an audit trail, and you're taking a valid bill where the seller's GST number etcetera is provided, and the gold is hallmarked, you have no limitation on how much gold you can buy.

Now just go back in time and see how many people who have contested elections, and now it is mandatory to disclose your assets, just note how many of our politicians or businessmen turned politicians have disclosed gold. It is far above the 100, 250, and 500 grams threshold. So remain assured. It is not a limitation. It is not a cap or a hard top as to how much gold you can own. Just make sure that you have proof of purchase, which is bills, ready.

Now the price that you are seeing on your screen on the multi commodity exchange in India is flashing in Indian rupees for gold in multiples of 10 grams. It does not include GST, which is levied at the rate of 3%. In the case of silver, the price in Indian rupees is for 1 kg. Here again, 3% GST applies and this price is ex-delivery Ahmedabad.

So some wholesalers might, I'm using the word might because in Mumbai, Zaveri Bazaar, I have not seen dealers asking for delivery charges. So if you're living in a far-off place, I am sure there must be many viewers of mine, not from Mumbai, you might have to pay delivery charges but remain assured it does not exceed Rs 50-100 for 10 grams.

So 3% GST and there is a misconception that this 3% is lost when you sell the gold. That is a misconception. Number one, even if you are not registered GST account holder or a GST payee, you are still making a payment by cheque and it is claimable in the books. If you are an assesse, a GST assesse, you will be paying this GST to the jeweller and obviously you will be taking a set off. So this 3% is not actually a loss. So get that misnomer out of your mind.

Then what about taxation? A reminder. Please consult your tax practitioner or a chartered accountant as well. Now standard rate of gold is declared by the government and since you are buying in physical, it's a physical asset, long term capital gain tax, at the rate of 20%, will be levied on you provided you have held that gold in any form bars, coins, rare antique jewellery, etcetera, etcetera in excess of 36 months, which is three years.

So 20% long term capital gains tax. If you are selling that gold and a profit in a less than three year, then short term capital gain tax will apply. Now here comes the contentious issue. What if I have not purchased that gold? And my relatives or whoever, anybody xyz person gifts you gold, up to Rs 50,000 in value for financial year is tax free. The minute your gift in gold bullion or silver crosses Rs 50,000 in one financial year, then taxes will be payable. So in case.

Now, for example, I am recording this video on 16th of February. If it all you want to give somebody gold worth, say 75,000, and you are approaching the financial year end, for those of my viewers who are not stationed in India, financial year starts on 1st April and ends on 31st March of the following year.

So if you have 75,000 worth of gold to be gifted, give half of it before 31st March and give half of it after 1st April. It will then span over to financial years. So 50,000 is a limit in one financial year to be gifted without taxes.

Also, once you're holding gold for a long period of time, in excess of three years, inflation indexing benefit will also be provided to you as a relief from inflation or mehangai. In Hindi, it is called mehangaidar.

I have often told you in my videos that you should not resort to your traditional rub test. Now there is an oval black coloured stone on which the gold is rubbed and the dust that falls of the gold is to an experienced eye enough proof whether the gold is 18 carats, 22 carats or whatever.

But that tests only the surface. What if the centre is a stone or a piece of iron or a copper, whatever? Only electronic testing can safeguard you and give you peace of mind. And I have often told you that this electronic testing must be done at a third party, not at the point of purchase, because if you are telling the guy who is selling you this gold to test the purity, you're telling a wolf to guard the chicken.

Now, many of you have asked me that what do you mean by saying that the charges for this, electronic testing is less than a cost of a masala dosa or a pav bhaji or a pizza at any given point in time? So let me tell you what is the going rate in Zaveri Bazaar. Zaveri Bazaar, for those of you don't know, is the bullion market. That is where many bullion shops, especially wholesalers, have their offices and showrooms.

So there are many, many testing shops. I would be surprised if there are less than 50-100 independent testing shops in Mumbai's Zaveri Bazaar. They charge you anything between Rs 50-100 per item, per item. So if you're buying a 1 kg of gold, which will be obviously a 1 kg bar of gold which will obviously cross Rs 50 lakh, even if the charges you 100 bucks, believe me, you're going to sleep much better by getting your gold tested. Rs 50-100 is not something you should grudge yourself and rob yourself of your good night's sleep, especially with our hard-earned money.

So that takes care of your testing charge. Now, the price of gold that is routinely quoted in Zaveri Bazaar is of 99.95% purity. I have often told you that the slimmest bid and offer spread, that is the difference between buying and selling, the finest or the smallest difference between buying and selling, is for 99.99% purity gold.

Now, when you are basically taking a quote from any wholesaler, he will give you a quote for 99.95. If you want 99.99, the charges are approximately Rs 200-250 per gram higher. I would say buy 99.99 higher purity because at the time of selling, you get a higher mark up as compared to 99.95.

Now, 99.95 is more prevalent because people who don't know much about gold tend to buy this and it is very easily and routinely available in the form of biscuits, in bars, coins, small minted festival coins. For example at the time of Diwali, there will be of embossment of Goddess Lakshmi. At the time of some IPL cricket match or something, it could be X Y Z team, etcetera, etcetera.

So these are readily available and 99.99, is routinely sold in the form of a 1 kg bar which looks like a Cadbury chocolate in a gold foil, which is why Mumbai, Zaveri Bazaar, Marwari and Gujarati gold traders, call it Cadbury. It's a slang word for 1 kg bar of gold. It is called Cadbury. So when you go for 99.99%, chances are if you want a smaller denomination, less than a kilo, the guy tell you, I will need to cut this. Now cutting means obviously charges.

Now if you want the machine cut, which means an absolutely fine finish, a commercial finish and it will be exact denomination of 50, 100, 150 or 200 grams, the charges for that cutting are higher. But if you want it hand cut, it is not a guarantee that you will get exactly 50 grams of 500 grams of 450 grams that you want. You might get it in a slightly odd figure, which is why it is called an uneven bar or even called tukda. Tukda means piece. Just like some people buy broken basmati rice, which is slightly cheaper, gold is also mostly traded in tukdas, where 99.99 is concerned.

But remain assured, as long as you're getting it hallmarked and stamped for the seller's logo, taking a bill with a hallmark certificate, and then, after all this, paying Rs 50-100 more for electronically testing your purchase and getting peace of mind, how does it matter whether it is the machine cut or a tukda?

In case you want to melt it and make jewellery or something at a later date, why pay higher charges for absolute fine machine cutting? So I would favour tukdas or uneven pieces both in gold and silver.

Silver, by the way, is almost always sold as 99.95. You do not normally get 99.99% silver. So it's okay if the quotation that you're getting is 99.95. But whenever you're taking a quote you're taking a quote, do clarify to the person you're speaking with whether the quote is for 99.95 or 99.99 because, like I said, there is a difference of Rs 200-250 bucks.

Now testers, like I said, are a dime a dozen. In Mumbai Zaveri Bazaar, you'd possibly see a tester in the bullion market area every 50-100 steps that you walk. Then insist on a bill and hallmarking and logo of the seller.

The reason being that your bill is your proof of purchase. At the time of claiming long term capital gain tax protection and the long-term capital gains and indexation benefits, it is counted from the date on which you have purchased this gold. So place do not lose your bill and insist on a bill. Make a payment officially by cheque, by online transfer, credit card, whatever means. But there should be an audit trail.

Now for some names that I'm referring and recommending to you remember, many of these guys are somebody who I have not dealt with, but they are supposedly reputed names in the market. And as long as you do your due diligence, testing hallmarking, taking bills, and insisting on a hallmark certificate, you should be fine.

So there are guys like VTL jewellers, PNR dwellers, Neha, jewellers, Nakoda bullion, National Refineries, and there would be obviously many more. It's not that I'm favouring them at the expense of excluding anybody else. You can at any given point in time, just walk in to any shop that looks large enough and big enough.

But I would suggest you not buy from individual small shop owners. Go to wholesalers and preferably somebody who has their own refinery. Which is why I told you, National Refinery and Nakoda jewellers. Even the other guys, VTL, PNR, Neha, they give you a very fine rate and testing and all, makes it very safe for you.

Friends I hope I've answered all your questions. On this happy note, I leave you with the exciting prospect of going to the Zaveri bazaar. Not only taking in the sights and smells and sounds and the ambience of what goes on in an average bullion market, but I also wish that you make lots of money buying and holding your bullion, both gold and silver.

Come the midterm elections in America in 2020 at the end of this year, once that's done and dusted, the effort to subdue gold to push up the dollar higher because the dollar is inversely related to gold. The dollar is the invoicing or the payment currency. If the dollar is kept strong, gold will be artificially subdued. Once the election is done in 2020, I think 2023 belongs to bullion.

Even before that, we have inflation. We have the prospects of stock markets either plateauing out in peaking out and money seeking better avenues to invest itself. I believe in gold. I believe in God. And I think you should do too.

On this happy note, I bid goodbye to you not before reminding you to click like on this video if you liked what you saw. Subscribe to my YouTube channel if you haven't already done so. Click on the bell icon to receive instant alerts about fresh videos being put about here.

In the comments section, good, bad or ugly, I'd love to hear from you. If there any more queries that you wish to send me, I would attempt to answer them at a future date. Also please help me reach out to fellow like-minded investors and traders by referring my videos to your family and friends. I hope you're staying safe. Take good care of your money and your health.

This is Vijay Bhambwani signing off for now. Take care. Bye.