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Buying Gold from BSE and MCX: Options and Considerations
Buying Gold from BSE and MCX: Options and Considerations
An individual can buy gold from the Bombay Stock Exchange (BSE) and Multi Commodity Exchange (MCX) through their demat account provided Electronic Gold Receipt (EGR) and Commodity segments, respectively, are activated on the individual’s demat account. Both BSE and MCX offer the option to take physical delivery of gold. The purity and legitimacy of gold physically bought through BSE and MCX are guaranteed by the respective exchanges and certified by the London Bullion Market Association (LBMA). The article also discusses the process of buying Electronic Gold Receipts (EGR) from BSE and gold contracts from MCX, including denominations, pricing, physical delivery, storage costs, income tax rules, and other considerations.
Key Takeaways:
- An individual can buy two types of gold from BSE and MCX with a physical delivery option: Electronic Gold Receipts (EGR) from BSE and gold contracts from MCX.
- The process of buying EGRs from BSE involves activating the EGR segment in the trading cum demat account, searching for specific symbols, and understanding the denominations, pricing, physical delivery, storage costs, and income tax rules.
- Buying gold contracts from MCX requires the activation of the Commodity segment in the demat account, understanding the available gold contracts, minimum buying quantities, physical delivery process, charges, and income tax rules.
From the information provided, it is clear that there are two types of gold that can be bought from the Bombay Stock Exchange (BSE) and Multi Commodity Exchange (MCX) with the option for physical delivery. These two types of gold are Electronic Gold Receipts (EGR) from BSE and gold contracts from MCX.
Electronic Gold Receipts (EGR) from BSE
Electronic Gold Receipts (EGR) are a form of gold investment that allows individuals to trade and hold physical gold through their demat accounts. Each EGR is backed by actual physical gold held at SEBI-authorized vaults. It is important to note that EGR is not the same as digital gold. EGRs are available in specified denominations of 100 milligrams, 1 gram, and 10 grams, and they are available in six different symbols, each denoting a specific purity of gold.
How to Buy EGR from BSE
To buy EGR from BSE, investors need to activate the EGR segment in their trading cum demat account. Once the EGR segment is activated, investors can trade EGR units just like they trade stocks or securities on BSE. The price of one unit of EGR reflects the day’s spot change in the price of physical gold of 995 and 999 purity. Investors can either convert EGRs into physical gold or sell them on BSE when the stock market is open.
Physical Delivery of Gold against EGR
Investors who are buying EGRs on stock exchanges are called beneficial owners. Such beneficial owners need to submit a delivery request application for taking physical delivery of gold. The storage charge for physical gold is Rs 15 per day per kilo of gold, and handling and logistics charges are dependent upon the storage vault from where the individual is taking the delivery of the gold.
Income Tax Rules
As per a Budget 2023 amendment, conversion of physical gold to EGR will not attract capital gains taxation. If the EGRs are sold after 36 months, they are treated as long-term capital gains and taxed at 20% rate with the benefit of indexation. However, in case the EGRs are sold before completing 36 months, then the gains made on the sale of EGR are treated as short-term capital gains and taxable at applicable slab rates for individuals.
Gold Contracts from MCX
MCX offers various types of gold futures contracts, including Gold (1Kg), Gold Mini (100 gram), Gold Guinea (8 gram), and Gold Petal (1 gram). These contracts have a definite expiry time, and on expiry, investors holding such contracts would have to mandatorily take physical delivery of the underlying gold quantity. The purity of all gold bought through MCX is 999 fineness.
How to Buy Gold Contracts from MCX
To buy gold contracts from MCX, investors need to have the ‘Commodity’ segment trading account activated in their demat account. The trading symbols for the gold contracts are mentioned, and the minimum buying quantity for the gold contracts on MCX is 1 unit.
Physical Delivery of Gold bought through MCX
All variants of Gold futures contract on MCX are physically settled with physical delivery to be taken place only during the tender period of around 5 days ahead of the specific gold contract’s expiry date. Investors have to collect the physical gold from their nearest MCX approved warehouse and pay for the warehouse-related charges.
Charges for Physical Delivery of Gold bought through MCX
If an investor takes delivery of gold, GST at 3% has to be paid by the buyer over and above the MCX settlement price. There are also making charges, warehousing charges, handling, and logistics charges involved.
Income Tax Rules
Income tax is not levied when an MCX gold contract is converted into physical delivery of gold. But if an MCX gold contract is bought but sold off before the gold contract’s expiry date, income tax rules would be applicable. It can either be classified as income from business or profession or short-term capital gains.
In summary, the two types of gold that can be bought from BSE and MCX with physical delivery options are Electronic Gold Receipts (EGR) from BSE and gold contracts from MCX. Each option has its own specific procedures for buying, physical delivery, charges, and income tax implications.
FAQ
Q1: How to buy gold from BSE and MCX?
- BSE: To buy EGRs from BSE, investors need to activate the EGR segment in their trading cum demat account, search for specific symbols, and understand the denominations, pricing, and other relevant details.
- MCX: Buying gold contracts from MCX requires the activation of the Commodity segment in the demat account, understanding the available gold contracts, minimum buying quantities, physical delivery process, charges, and income tax rules.
Q2: Can an individual take physical delivery of gold from BSE and MCX?
- BSE: Yes, an individual can take physical delivery of gold bought through EGRs from BSE.
- MCX: Physical delivery of gold from MCX can be taken at designated MCX-approved delivery centers on expiry of the specific contract bought.
Q3: What are the income tax rules for buying gold from BSE and MCX?
- BSE: Income tax rules apply when EGRs are sold after a certain period, and the gains are treated as long-term or short-term capital gains based on the holding period.
- MCX: Income tax is not levied when an MCX gold contract is converted into physical delivery of gold. However, if an MCX gold contract is bought but sold off before the expiry date, income tax rules would be applicable.
2 Types of Gold That Can Be Bought from BSE, MCX with Physical Delivery Option
1. Electronic Gold Receipts (EGR) from BSE
- Backed by actual physical gold held at SEBI-authorised vaults.
- Not the same as digital gold.
- Available in specified denominations of 100 milligrams, 1 gram, and 10 grams.
- Purity denoted by fineness terms (995 and 999).
- Price reflects the day’s spot change in the price of physical gold of 995 and 999 purity.
- Physical delivery process involves submitting a delivery request application and paying storage charges, handling, and logistics charges.
2. Gold Bought through MCX
- Various gold futures contracts available for physical delivery at designated MCX-approved delivery centers.
- Available contracts: Gold (1Kg), Gold Mini (100 gram), Gold Guinea (8 gram), and Gold Petal (1 gram).
- Purity of all gold bought through MCX is 999 fineness.
- Physical delivery process involves visiting MCX-approved delivery centers, paying GST, making charges, and warehousing charges.
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