Q707. Being an NRI . . . Is it good

to buy gold in India or Out of India

Question: Dear Virendar Chand, This is an Indian family living in Germany for past few years. Recently when i was searching for the custom tax on carrying gold to India, i came accross your site. Its really interesting the way you explain things. I would like to appreciate for the help you are offering to all the NRI's with their doubts. 1st of all i would like to thank you for that. Thank you SIR !!! And here is my question --> After seeing all your explanation regarding carrying gold: I got a doubt. Which is the best way?? 1. Carrying gold to India by paying Customs tax? or 2. Buying gold in India itself by transferring money from Germany (including exchange rate)? I have this doubt because transferring money to India is also related to the exchange rate (unpredictable - same as gold). Transferring money and then buying gold in India.. orelse.. Buying Gold in Germany and then paying custom tax.. which is the cheapest (i mean profitable to me).. Lets say: If i want to buy 10gms gold biscuits every 3- 4months. So within 1 year i will have 3gold biscuits (10gms each). And after 1 year i would like to come to India with those Gold Biscuits.(May be for explanation - you can take rough figures of exchange rate and gold rate) I am asking this because: I do not want to feel that "I should have bought it in India itself, instead of paying this custom tax". I am little confused where to buy (considering Custom rate and exchange rate). I know we cant change our fate and market is sometimes unpredictable. Cant say what happens in the future. But atleast trying not to mess up things with a small & positive hope and positive prediction. And one more silly question: I don't know if i got this right or not. It says that from: ""March 2013: The Rupees 10,000 gold jewellery value limit for male passenger will increase to Rupees 50,000 and for female passengers the duty free allowance on gold of Rupees 20,000 will increase to Rupees 100,000."" Gold jewellery in the sense?? Why cant this apply to the gold biscuits?? Lets say: 3*10gms biscuits (30gms) also costs less than Rs.100,000. But it is in the biscuit form and not a jewellery. Why cant i take gold biscuits of same worth?? Whats the difference?? Please correct me if i understood it wrongly. Thanking you in advance, German Based Indian Family ;) Jai Hind!! Answer: Purchasing gold as an investment does have its risks! as you yourself mention, the currency exchange rate/gold price fluctuations! Whether you should buy gold abroad in Germany or in India would have to be a personal decision.

Price of Gold in India

Generally the price of gold in India is in line with world gold prices. As long as we talk of pure gold! worldwide prices are almost similar. The fluctuation comes from addition of taxes such as vat etc. NRIs settled overseas, taking a few grams of gold, from abroad to sell in India simply does not make sense! Taking the maximum allowed 1 Kg of gold though, for instance from Dubai currently may be profitable even after paying customs duties/taxes in India, however, both the purchase price and applicable duties and taxes in India have to be paid in foreign currency. Then when the gold is sold for a profit in India, the payment is received in Indian Rupees! Furthermore, money received from the sale of such gold cannot be converted to foreign currency in India.

No Customs duty exemption on Gold

biscuits

The Rupees 50,000 duty exemption for male passengers and Rupees 100,000 for female passengers is not allowed on gold biscuits and is only applicable to jewelery. This happens to be the current law and perhaps a method to control the inflow of gold into India by the government.

Price of gold jewelery

The price of gold jewelery generally consists of the amount of pure gold used to make the jewelery plus the cost of labor or making charges. Generally jewelers in foreign countries such as USA, Canada may charge up to 100% of the price of gold as labor charge. For example if the cost of the gold used in a jewelery item is $100, then the labor charged is also $100, making the customer pay $200 for the jewelery item. Surprisingly not many people even bother to ask how the price is calculated. This is where the price of gold jewelery becomes cheaper in countries like India and Dubai. People who are aware of labor charges can bargain the price of labor down.

Bargaining price of gold jewelery

While the price of gold is not subject to price cuts by bargaining customers, the cost of making of jewelery certainly is. In India as well as places like Dubai, bargain hunters can bring the price down by negotiating a lower cost of making price. In Dubai, if you wish to bargain, avoid buying gold at Dubai airport, do your shopping in jewelery shops outside in the city where you will have a better chance to bargain. In India, making charges vary from Indian Rupees 75 to Indian Rupees 2500 per gram. In Dubai, the charges range from AED10 (Approximately Rupees 166 per gram to (Approximately 8320 Rupees per gram) AED 500.