Gold Monetisation Scheme: Turning Idle Household Gold Into a Tax-Free Earning Asset
India's households collectively sit on an estimated 20,000+ tonnes of gold — a staggering reservoir of private wealth that generates zero return while resting in home safes and bank lockers. Launched in 2015, the Gold Monetisation Scheme (GMS) was conceived as a structural solution to this problem, channelling dormant gold into the formal financial system while rewarding depositors with interest income. As of 2025-26, the scheme is undergoing active review, with the Reserve Bank of India, the Finance Ministry, and prominent industry bodies collaborating on a comprehensive revamp. This article walks through the scheme's current framework, the proposed reforms, and — most critically — the tax treatment that every prospective depositor must understand before committing their gold.
What Is the Gold Monetisation Scheme?
The Gold Monetisation Scheme is a government-backed programme enabling individuals, trusts, and institutions to lodge physical gold with designated banks in exchange for interest earnings. The fundamental premise mirrors that of a fixed deposit — instead of earning interest on cash, the depositor earns interest on the gold equivalent credited to a Gold Savings Account.
Gold is accepted in virtually every physical form: jewellery, coins, and bars. Once submitted, the gold is melted and assayed at a certified facility to determine its exact purity, after which the fine gold equivalent is credited to the depositor's account. Interest then accrues on this balance throughout the chosen deposit tenure.
Critical Note for Depositors: The same physical items — particularly jewellery — are not returned at the end of the tenure. What the depositor receives at maturity is either gold of equivalent weight and purity or its prevailing cash value. Anyone with emotionally significant or heirloom jewellery must carefully weigh this irreversible aspect before proceeding.
Key Features of the Current Scheme
| Feature | Details |
|---|---|
| Eligible Depositors | Individuals, HUFs, trusts, mutual funds, companies, charitable institutions |
| Minimum Deposit Quantity | 10 grams of raw gold |
| Accepted Forms | Jewellery, coins, bullion bars |
| Prevailing Interest Rate | Approximately 2% to 2.5% per annum |
| Available Tenure | Short Term Bank Deposit (STBD) — 1 to 3 years |
| Discontinued Components | Medium Term and Long-Term Government Deposit components have been officially discontinued in 2026 and cannot be opened |
| Redemption Options | Physical gold or cash equivalent at market price upon maturity |
| Regulatory Oversight | Designated banks operating under RBI guidelines |
Why Has the Scheme Fallen Short of Its Potential?
Despite operating for a decade, the GMS had mobilised only approximately 38 tonnes of gold by March 2025. Against a backdrop of 20,000-plus tonnes sitting idle across Indian households, that figure represents a marginal fraction of the intended target. Several structural and behavioural factors explain this underperformance:
1. Emotional Significance of Gold Jewellery
In Indian culture, gold jewellery frequently carries deep familial and generational meaning. The mandatory melting of ornaments during purity assessment has been a firm deterrent for families holding pieces with sentimental or heirloom value.