How it will work
In order to monetise your gold holdings (bullion or jewellery), you will first need to ascertain the purity of the gold you own. For that, under the Scheme, there would be around 350 purity-testing centres. You will need to take your gold to one of the testing centres. The testing centre will test the purity of gold and issue a certificate of deposit to you. The certificate will state the amount and the purity of the gold deposited.

The testing centre will also melt the gold you provide. This means that you cannot get the same jewellery back which you had deposited. The entire process of purity ascertainment will require your consent at multiple stages, with the results of each stage shared with you. So, if you want to back off anytime, you very well can.

The purity-ascertainment process will also incur a nominal fee. Also, the minimum quantity of gold that you can bring is 30 gm.

Once you get the certificate of deposit from the purity-testing centre, you can take it to your bank. The bank will open a gold savings account for you. In the gold savings account the amount of gold you have deposited will get credited. With that you will have successfully monetised your gold holdings.

What you will earn
As per the draft guidelines, the interest rate to be paid on your gold holdings will be decided by the bank. The interest will be credited to your account after 30-60 days of opening the account. Note here that both the principal and the interest will be valued in gold. For example, if you have deposited 100 gm gold and you are paid one per cent interest, then your gold holdings will be shown 101 gm.

How you will be taxed
The GMS will be exempt from all kinds of taxes - capital gains tax, wealth tax and income tax.

What's the tenure?
The GMS will work like a fixed deposit. The minimum lock-in period will be one year. The period could be increased in multiples of a year thereafter. You will also be able to withdraw your gold deposits within the lock-in period.

How redemption will happen
You will be able to redeem the gold deposited in terms of cash or gold.

Hits and misses
The GMS is a well-intentioned scheme aiming to bring down the CAD. In the last couple of years, gold prices have remained depressed. This has disappointed gold investors. Also, idle gold earns no interest. On the contrary, storing it safely requires expenditure to be made. Given these downsides, the GMS will help gold investors earn income from their gold holdings. Institutions like temples will also be able to monetise their holdings.