Conceptual · Article 3.1.2.5

Gold Monetisation Scheme.

How to Make Idle Gold Earn a Tax-Free Return.

Published as on 22 July 2026

The Gold Monetisation Scheme (GMS) is, in effect, a fixed deposit denominated in grams of gold rather than rupees. You deposit physical gold you already own with a designated bank, earn 0.50–0.60% annual interest in rupees — entirely tax-free — and take back gold or its cash value at maturity, with no capital-gains tax on the appreciation. Launched in November 2015 to put India's estimated 23,000–25,000 tonnes of idle household gold to work, it has mobilised under 38 tonnes in nearly a decade. Since 26 March 2025 the medium- and long-term government deposits are closed; only the 1–3 year Short-Term Bank Deposit accepts fresh gold. It is a way to earn on gold you already own — not a way to buy gold — and the deposited metal is irreversibly melted to 995 fineness.

0.50–0.60%

Interest · Tax-Free

1–3 years

STBD Tenure

~37.81 t

Mobilised in a Decade

Melted

Gold · Irreversible

Executive Summary · Page 2

Executive Summary · 6 Findings

GMS answers a narrow but real question: what do I do with gold that sits in a locker earning nothing while it costs me storage and insurance? The scheme lets you deposit that idle metal, collect a modest fully tax-free interest, and reclaim gold or cash at maturity with no capital-gains tax. The catch is physical: the gold is melted and assayed permanently, so the scheme fits bars, coins and unsentimental jewellery — not heirlooms.

Covers what GMS is and why it was launched, the March 2025 reset that closed the medium- and long-term deposits, how the 0.50–0.60% interest is fixed on Day-1 rupee value, the comprehensive income-tax and capital-gains exemptions, who can deposit and what gold is accepted, the melt-and-assay deposit process and irrevocable redemption choice, why participation has stayed under 0.2% of household gold, and six questions Indian investors ask.

Key Findings

A fixed deposit denominated in grams of gold.

Launched in November 2015, GMS lets you deposit physical gold with a designated bank, earn rupee interest calculated on the gold's Day-1 value, and receive grams of gold (or their cash equivalent) at maturity. It is not a route to buy gold — it monetises gold you already hold, turning a dead locker asset into a small income stream.

Only the Short-Term Bank Deposit survives.

From 26 March 2025 the Medium-Term (5–7 yr) and Long-Term (12–15 yr) Government Deposits were discontinued. Only the 1–3 year Short-Term Bank Deposit (STBD) accepts fresh gold, and even that is at each bank's discretion. Existing MTGD/LTGD deposits run to maturity on their original terms.

Interest is 0.50–0.60% — fixed on the deposit-day value.

STBD interest is set in rupees on the value of gold at deposit and does not change with later price moves. Deposit 100 grams at ₹8,000/gram (₹8,00,000 base) and 0.60% pays ₹4,800 a year, ₹14,400 over three years — regardless of where gold goes. Modest, but it is 0.50–0.60% more than idle gold ever earned.

Everything is tax-exempt — and unchanged by Budget 2026.

Interest income is exempt from income tax; the capital gain on the gold at maturity is exempt from capital-gains tax; no TDS is deducted. Budget 2026 tightened Sovereign Gold Bond exemptions but left GMS untouched. You should still declare the interest and gain in the exempt-income schedules of your ITR.

The gold is melted — the original form is lost forever.

At a BIS-certified CPTC your gold is assayed and, on your consent, melted and refined to 995 fineness. Jewellery is permanently destroyed as jewellery; you get standard bars or cash. This single, irreversible step is the scheme's biggest barrier — no one submits a family heirloom for 0.6% a year.

Best for bars, coins and temple trusts — not heirlooms.

GMS makes most sense for institutions (temples, mutts, trusts) holding gold in bar form and for individuals with inherited bars or coins they will eventually sell. For them, melting is a non-issue and the tax-free interest plus exempt appreciation is genuine value. For sentimental jewellery, GMS is the wrong tool.

At A Glance

Metric	Value	Detail
Launched	Nov 2015	Revamped 1999 scheme
Open tenure	1–3 yr STBD	MTGD/LTGD closed
Interest p.a.	0.50–0.60%	On Day-1 rupee value
Minimum	10 grams	Assayed to 995
Interest tax	Exempt	No income tax, no TDS
Capital gains	Exempt	On gold at maturity
Melting	Required	Irreversible
NRI eligible	No	Residents / HUFs / trusts

Exhibit 01: The Tax-Free Advantage vs Holding Gold

Outcome (100 g, 3 yr)	GMS (STBD)	Idle Gold
Interest earned	₹14,400	₹0
Gain on ₹7,000/g rise	₹7,00,000	₹7,00,000
Tax on that gain	₹0 (exempt)	₹87,500 LTCG
Net advantage	+₹1,01,900	—

*Illustrative, FY 2025-26. Assumes 100 g deposited at ₹8,000/g rising to ₹15,000/g. GMS interest is fully exempt; the ₹7 lakh gain is exempt under GMS versus 12.5% LTCG (₹87,500) on ordinary physical gold sold after 24 months. Prices are illustrative, not guarantees.

The Opening · Page 3

The Opening

India sits on one of the largest hoards of idle gold on earth — an estimated 23,000 to 25,000 tonnes in household lockers, bank vaults and temple treasuries, most of it earning nothing while the country imports 700 to 900 tonnes more each year. The Gold Monetisation Scheme was the Government's attempt to unlock that dead capital: deposit your physical gold with a designated bank, and instead of paying to store it, you earn interest on it. Think of it as a fixed deposit measured in grams rather than rupees.

"GMS asks gold holders to trade the one thing Indian families prize most — the physical object itself — for a return of half a percent a year. That the scheme has mobilised under 38 tonnes in a decade is not a mystery. It is the predictable price of the melting pot."
The Melting Barrier

The mechanics. You deposit grams of gold; interest is calculated in rupees on the gold's value at the time of deposit and paid annually or at maturity. At the end of the term you take back gold — melted and re-cast as 995-fineness bars — or its cash equivalent, whichever you chose upfront. The appreciation in the gold's value over the term comes back to you free of capital-gains tax, and the interest is free of income tax. On paper, few Indian instruments are taxed so gently.

The March 2025 reset. The scheme once offered three tenures. From 26 March 2025 the Government discontinued the medium-term (5–7 year) and long-term (12–15 year) government deposits "due to evolving market conditions", leaving only the 1–3 year Short-Term Bank Deposit open for fresh gold — and that at each bank's discretion. It was a quiet admission that a decade of low uptake had not justified the cost of the longer commitments.

The Honest Boundary: GMS is NOT a way to buy or accumulate gold — it monetises gold you already own. It is NOT a high-yield product — 0.50–0.60% is deliberately modest. It is NOT suitable for sentimental jewellery — the metal is irreversibly melted. It IS a genuinely tax-efficient way to earn on idle bars, coins and unwanted gold for holders who are indifferent to the physical form.

Structure

Part I

What GMS Is, Why It Exists & the March 2025 Reset

Part II

The Interest, the Tax Exemptions & the Real Economics

Part III

Who Can Deposit, the Process & Redemption

Part IV

The Verdict: A Niche Tool, Used Correctly

Use If

✓ You hold gold bars or coins

✓ Indifferent to the physical form

✓ A trust / temple with vault gold

✓ Willing to melt for tax-free return

Do NOT Use If

✕ The gold is a family heirloom

✕ You want to buy gold exposure

✕ You may need instant liquidity

✕ You are an NRI

Part I

What the Gold Monetisation Scheme Is, Why It Exists, and What Changed in March 2025

A fixed deposit denominated in gold; the policy problem of 24,000 idle tonnes and rising imports; and the reset that closed the medium- and long-term deposits, leaving only the 1–3 year Short-Term Bank Deposit open for fresh gold.

Part I · Page 4

The Three Tiers — and What Remains

Deposit	Tenure	Status
STBD	1–3 years	Open
MTGD	5–7 years	Closed 26 Mar 2025
LTGD	12–15 years	Closed 26 Mar 2025

The Short-Term Bank Deposit is held with the designated bank; the two longer government deposits, now discontinued, were held on the Government's account. Deposits made under MTGD or LTGD before 26 March 2025 continue undisturbed until their original maturity. For anyone depositing gold today, the choice is simply the STBD — 1, 2 or 3 years.

Why the Scheme Exists

Unlocking Dead Capital

India holds an estimated 23,000–25,000 tonnes of privately owned gold, most of it idle in lockers and vaults while the country imports 700–900 tonnes more a year — a heavy foreign-exchange drain. GMS, launched in November 2015 as a revamp of the 1999 Gold Deposit Scheme, aimed to bring that idle metal into productive use by banks, jewellers and the RBI, and to trim import dependence.

A Decade of Low Uptake

Measure	Value	Context
Mobilised	~37.81 t	2015–Mar 2025
Depositors	~5,693	In a decade
Household gold	23,000+ t	Estimated stock
Share tapped	<0.2%	Of that stock

Nearly ten years in, GMS had drawn barely a rounding error of India's gold. The Government's decision to close the longer-dated tiers in March 2025 was, in effect, a tacit acknowledgment that the scheme's original ambitions were not met — the interest cost of long deposits was not justified by the volumes, and imports never materially fell.

What GMS is not: it is not a gold-purchase or SIP product — you cannot buy gold through it. It is not a gold loan — you are not pledging and reclaiming the same piece; the metal is melted. And it is not a substitute for a Sovereign Gold Bond or a gold ETF, which give price exposure to gold you do not yet own. GMS monetises gold already in hand.

Part II

The Interest, the Tax Exemptions, and the Real Economics of Depositing Gold

How the 0.50–0.60% is fixed on the deposit-day rupee value; why the interest and the capital gain are both fully exempt — and untouched by Budget 2026; and how the honest return compares against simply holding the metal.

Part II · Page 6

How the Interest Works

STBD Tenure	Interest p.a.
1 year	0.50%
>1 – 2 years	0.55%
>2 – 3 years	0.60%

Fixed on Day-1 Value

Per the RBI's GMS notification, STBD interest is calculated in rupees on the gold's value at the time of deposit. Deposit 100 g at ₹8,000/g and the ₹8,00,000 base is locked; 0.60% pays ₹4,800 a year, ₹14,400 over three years — whether gold later climbs to ₹15,000 or sinks to ₹6,000. Interest is paid in INR on 31 March or accumulated to maturity.

Is 0.5–0.6% Worth It?

The right benchmark is not other yields — it is the zero your gold earned in the locker. For a 30% bracket holder, 0.60% tax-free is worth roughly 0.86% pre-tax. Small, but strictly better than nothing, on top of price appreciation you keep tax-free.

Taxation (FY 2025-26)

Interest & Gains — Both Exempt

Interest income is exempt from income tax; the capital gain on the gold principal at maturity is exempt from capital-gains tax; wealth tax does not apply; no TDS is deducted. Few Indian products carry so complete an exemption.

Budget 2026 Left GMS Alone

Budget 2026 restricted the Sovereign Gold Bond capital-gains exemption to original subscribers holding to maturity — but made no change to GMS. Both GMS exemptions remain fully intact for FY 2026-27 and beyond. Still declare the interest in Schedule EI and report the exempt gain: the exemption must be claimed, not assumed.

GMS vs Ordinary Physical Gold

Aspect	GMS (STBD)	Idle Gold
Interest	0.50–0.60%	None
Gain tax	Exempt	12.5% LTCG
Storage cost	Nil	Locker + insurance
Form kept	No (melted)	Yes

Illustrative, FY 2025-26. On a ₹7 lakh gain, ordinary physical gold faces ₹87,500 LTCG at 12.5% (held >24 months); under GMS the same gain is exempt, plus tax-free interest. The trade-off is the irreversible melting of the metal.

Part III

Who Can Deposit, the Melt-and-Assay Process, and Getting Your Gold Back

Eligible depositors and accepted gold; the two-step route through a designated bank and a BIS-certified CPTC where the metal is assayed and melted; and the irrevocable choice between physical gold and cash at maturity, with its lock-in and charges.

Part III · Page 8

Who & What Is Eligible

Item	Rule
Depositors	Residents, HUFs, trusts, firms
NRIs	Not eligible
Minimum	10 grams raw gold
Accepted	Bars, coins, plain jewellery
Assayed to	995 fineness (99.5%)

Jewellery With Stones — Check First

Items with embedded gems, diamonds or non-gold metals are awkward: only the gold content counts, assessable after discounting the rest, and CPTC handling varies. Bars and coins go through cleanly. Confirm the specific CPTC's procedure before taking in any stone-set piece. Designated banks include SBI, HDFC, ICICI, PNB, BoB and others — but only specifically GMS-enabled branches.

Redemption at Maturity

An Irrevocable Choice

Declare upfront whether you want physical gold or cash — it cannot be changed later. Physical gold: standard 995 bars, with a 0.5% administrative charge on value. Cash: INR at the market price on maturity date, no charge. Premature redemption is allowed after a 1-year lock-in, with a bank-set penal deduction; the gold-or-cash mode is then at the bank's discretion, not yours.

The Deposit Process

Visit a designated GMS branch.

Enquire about the STBD at a formally GMS-enabled branch and collect the application form.

Take gold to a BIS-certified CPTC.

Within 7 days, carry your gold to a Collection and Purity Testing Centre, listed at bis.gov.in under the Gold Monetisation Scheme.

Purity tested in your presence.

The CPTC assays your gold in front of you and discloses the weight and fineness.

Consent to melting — the form is lost.

Accept the assay and the gold is melted to 995; the CPTC issues a receipt. The original jewellery, bar or coin form is permanently gone.

Account credited, certificate issued.

The bank credits your STBD within 30 days of the receipt and sends a deposit certificate confirming quantity, purity, tenure, rate and redemption choice.

Part IV

The Verdict

A tax-free return on gold you were never going to wear.

Part IV: The Verdict · Page 10

30-Second Summary

The Gold Monetisation Scheme lets you deposit idle physical gold with a designated bank, earn 0.50–0.60% annual interest fixed on the deposit-day rupee value, and reclaim gold or cash at maturity. The interest is exempt from income tax and the appreciation is exempt from capital-gains tax — a rare, comprehensive exemption left untouched by Budget 2026. But the gold is irreversibly melted to 995 fineness, and since 26 March 2025 only the 1–3 year Short-Term Bank Deposit accepts fresh metal.

That single melting step explains everything: under 38 tonnes mobilised in a decade, from about 5,693 depositors — less than 0.2% of India's household gold. GMS is not a way to buy gold, not a high-yield product, and not for heirlooms. It is a genuinely tax-efficient way to earn on gold you already hold and are indifferent to as an object — most naturally bars, coins and vault gold. Minimum 10 grams; NRIs cannot participate; the physical-or-cash redemption choice is irrevocable.

"The scheme's design is sound and its tax treatment is generous. Its failure is cultural, not financial: it asks Indians to melt gold they hold precisely because they will not part with its form. For the holder who genuinely does not care about the object — the temple, the trust, the owner of a plain bar — GMS is close to free money. For everyone else, the answer is simply no."
The Final Orientation

The Bottom Line: Use GMS only for gold you are content to see melted — bars, coins, unsentimental or broken jewellery, or institutional vault holdings. For that gold it converts a costly idle asset into a modest, fully tax-free return with exempt appreciation. Choose the 1–3 year STBD, confirm your bank's GMS-enabled branch and nearest CPTC, and decide your physical-or-cash redemption preference before you deposit, because it cannot be reversed. Never submit heirloom jewellery, and never treat GMS as a way to gain gold exposure — for that, look to ETFs or SGBs instead.

ADWIZR · July 2026

Decision Rules

Use Correctly As

✓ Income on idle bars & coins

✓ A trust / temple vault strategy

✓ Tax-free interest + exempt gains

✓ A pre-sale parking of gold

Misuse Destroys Value

✕ Heirloom / sentimental jewellery

✕ Buying gold exposure

✕ Money needed at short notice

✕ NRI deposits

Three Misconceptions

What Investors Get Wrong

(1) "I can get my exact jewellery back." No — it is melted; you receive standard bars or cash. (2) "0.6% is on the maturity value." No — it is fixed on the Day-1 deposit value. (3) "I can switch cash to gold later." No — the redemption choice is irrevocable, set at deposit.

vs ETFs & SGBs

Monetise vs Own

GMS earns a return on gold you already hold, at the cost of melting it. Gold ETFs and Sovereign Gold Bonds give price exposure to gold you buy and never touch physically. Different jobs: GMS for the vault, ETFs/SGBs for the portfolio.

1–3 yr

STBD tenure

Only tier open

0.5–0.6%

Interest p.a.

Tax-free, Day-1 value

Exempt

Capital gains

On gold at maturity

Investor FAQ

Questions Indian Investors Ask

Six questions, answered directly.

Investor FAQ · Page 12

Frequently Asked Questions

Q1 Should I deposit my gold jewellery under GMS?

Only if you are genuinely indifferent to the jewellery's physical form. GMS requires the gold to be melted and refined to 995 fineness — your pieces are permanently converted into a gold deposit, and at maturity you receive standardised bars or cash, never the original items. For heirlooms or jewellery with sentimental value, GMS is inappropriate; consider a gold loan (which pledges without melting) if you need liquidity. GMS suits bars, coins, and broken jewellery where only the gold content matters.

Q2 How is GMS interest taxed, and is the capital gain on my gold exempt?

Both are fully exempt and were left unchanged by Budget 2026. Interest earned under the Short-Term Bank Deposit is exempt from income tax, and the capital gain on the gold's appreciation at maturity is exempt from capital-gains tax. No TDS is deducted. You should still declare the interest in the exempt-income schedule (Schedule EI) of your ITR and report the exempt capital gain — the exemption must be claimed, not assumed. Budget 2026's changes applied to Sovereign Gold Bonds, not to GMS.

Q3 How is the 0.50–0.60% interest calculated — on what gold price?

Per the RBI's GMS notification, STBD interest is calculated in rupees on the value of gold at the time of deposit — a base fixed on Day 1 that does not change with later gold price movements. Deposit 100 grams when gold is ₹8,000/gram and the rupee base is ₹8,00,000; at 0.60% the annual interest is ₹4,800, regardless of whether gold later rises to ₹15,000 or falls to ₹6,000. Interest is paid in INR annually on 31 March or accumulated to maturity.

Q4 Can I take my gold back as physical gold at maturity, or do I receive cash?

You must declare your preference — physical gold or cash equivalent — when you open the STBD, and the choice is irrevocable. If you choose physical gold, you receive standard bar denominations at 995 fineness at maturity, with a 0.5% administrative charge on the gold value. If you choose cash, you receive the INR equivalent at the prevailing market price on maturity date, with no charge. For premature redemption (allowed after the 1-year lock-in), whether you get gold or cash is at the bank's discretion, not yours.

Q5 Are the MTGD and LTGD components still available for new deposits?

No. The Medium-Term Government Deposit (5–7 years) and Long-Term Government Deposit (12–15 years) were discontinued from 26 March 2025 under a Government of India notification dated 25 March 2025. No fresh deposits under these categories are accepted. Existing deposits made before 26 March 2025 continue on their original terms until maturity. Only the Short-Term Bank Deposit (1–3 years) accepts fresh gold from FY 2025-26 onwards, at each bank's discretion.

Q6 Why has GMS participation been so low despite the tax benefits?

GMS has mobilised roughly 37.81 tonnes from about 5,693 depositors in nearly a decade — under 0.2% of India's estimated 23,000+ tonne household gold stock. The main barriers: the melting requirement rules out most household jewellery, which carries deep emotional value; interest of 0.50–0.60% is a modest incentive against the logistical effort; the CPTC testing network is concentrated in major cities; and banks have little commercial incentive to promote it aggressively. The discontinuation of the longer-dated components in March 2025 effectively acknowledged these structural constraints.

Key Terms & Definitions

Gold Monetisation Scheme (GMS)

A Government of India scheme, launched in November 2015, that lets resident gold holders deposit idle physical gold with designated banks to earn rupee interest and reclaim gold or cash at maturity, while the metal is put to productive use. In effect, a fixed deposit denominated in grams of gold.

Short-Term Bank Deposit (STBD)

The only GMS tier still open for fresh deposits, with a 1–3 year tenure held on the designated bank's account. Interest of 0.50–0.60% p.a. is set by the bank on the gold's deposit-day rupee value. The medium- and long-term government deposits were discontinued from 26 March 2025.

CPTC

A Collection and Purity Testing Centre, certified by the Bureau of Indian Standards, where deposited gold is assayed in the depositor's presence and — on consent — melted and refined to 995 fineness. This melting step is irreversible and is the scheme's single biggest practical barrier.

995 Fineness

A purity of 99.5% gold, the standard to which GMS gold is refined. Regardless of the form deposited — bar, coin or jewellery — the depositor's holding is standardised to 995-fineness gold, returned as tradeable bars or their cash equivalent at maturity.

Irrevocable Redemption Choice

The depositor must specify at the time of opening the STBD whether maturity proceeds will be taken as physical gold or as cash. This election cannot be changed later. Physical redemption carries a 0.5% administrative charge; cash redemption carries none.

MTGD / LTGD

The Medium-Term (5–7 year) and Long-Term (12–15 year) Government Deposits under GMS, held on the Government's account. Both were discontinued for fresh deposits from 26 March 2025; deposits made earlier continue on their original terms to maturity.