Gold Savings Schemes: What the Law Says and Why You Should Care?
Gold Savings Schemes, offered by jewelers, are a popular way for customers to save up for gold purchases through monthly installments. While they provide an excellent opportunity for financial planning and convenience, these schemes operate within a carefully regulated legal framework. Here's a deep dive into the legalities that govern these schemes, ensuring they remain both beneficial and lawful.
How Gold Savings Schemes Work
These schemes typically involve:
1. Monthly payments for up to 11 months.
2. A maturity benefit, often a waiver of the last installment or a discount on the total value.
3. Redemption in the form of gold jewelry at the end of the tenure.
While they seem straightforward, the structure of these schemes is carefully crafted to comply with Indian laws.
Legal Framework Governing Gold Savings Schemes
1. The Companies Act, 2013, and Deposit Rules
Under the Companies (Acceptance of Deposits) Rules, 2014, any funds collected by a company may be classified as "deposits" unless they meet specific exclusions.
Jewelry brands ensure compliance by:
Limiting the scheme to 365 days or less.
Treating the payments as advances for goods, which are excluded from the definition of "deposits" under Rule 2(1)(c)(xii) of the Deposit Rules.
Why It Matters:
If the scheme exceeds 365 days or fails to qualify as an advance, it would be deemed a deposit, making the jeweler liable for penalties under the Companies Act.
2. The ₹100 Crore Threshold and SEBI Regulations
Under the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999, any scheme pooling funds above ₹100 crore may be classified as a Collective Investment Scheme (CIS).
To avoid this:
Jewelers cap their total collections under the scheme at ₹100 crore.
They design the schemes as individual transactions rather than pooled investments.
3. Banning of Unregulated Deposit Schemes Act, 2019 (BUDS Act)
The BUDS Act prohibits businesses from running unregulated deposit schemes.
Any scheme extending beyond 365 days or failing to deliver promised benefits could fall under this category.
Violators face severe penalties, including fines up to twice the funds collected and imprisonment up to 10 years.
Why Jewelers Stay Within the Law:
By delivering goods within 365 days and adhering to other legal safeguards, jewelers ensure their schemes don’t violate the BUDS Act.
4. High Court Rulings: Commercial Transactions
In Sandeep Badri prasad Agrawal v. SEBI, the Bombay High Court ruled that Gold Savings Schemes are voluntary commercial transactions between jewelers and customers.
However, this does not exempt these schemes from complying with overarching laws like the Companies Act or SEBI regulations.
What This Means for You
As a customer, these legal safeguards protect your investments, ensuring:
Your money is handled responsibly.
Jewelers deliver on their promises within the legal timeframe.
For jewelers, adhering to these laws is crucial to maintain trust and avoid hefty penalties.
Aurel Gold Purchase Plan: Redefining Gold Savings for Your Benefit
When it comes to gold savings schemes, many brands offer enticing benefits like waiving one installment to attract customers. However, Aurel’s Gold Purchase Plan (GPP) is designed with a more transparent and value-driven approach, offering unique advantages that truly empower our customers. Here’s how GPP stands out from the crowd:
1. No Alluring “Free Installment” Gimmicks – A Focus on Value
Unlike other brands, Aurel GPP does not offer the allure of a “free installment.” Why? Because such offers often negate the benefits of rupee cost averaging, a key advantage for gold buyers.
Consider this example:
In typical schemes, if gold prices range from ₹70,000 at the start to ₹80,000 by the end of 11 months, the final allocation is based on ₹80,000 (even with one waived installment).
Under Aurel GPP, your gold is purchased monthly at prevailing rates from ₹70,000 to ₹80,000, ensuring you benefit from average pricing rather than locking in at higher prices.
This difference means better long-term value for your investment.
2. Pure Gold and Silver Bars, Not Just Jewelry
With Aurel GPP, you receive 24K gold or silver bars. These bars offer flexibility:
You can choose to convert them into jewelry at your convenience, avoiding the 15%-25% making charges typically added by other brands.
In contrast, most other schemes mandate buying jewelry, forcing customers to incur hefty making charges upfront.
This flexibility ensures you maximize the value of your savings.
3. Convenience with Doorstep Delivery
Aurel GPP goes the extra mile by delivering your gold or silver bars right to your doorstep. No need to visit stores or navigate crowded jewelry shops.
This service ensures a seamless and secure experience for all our customers.
Other brands often require you to visit their stores, adding inconvenience to an already time-sensitive process.
4. A Pure Commercial Deal, Not a Deposit Scheme
Aurel’s GPP is structured as a pure commercial transaction, where customers purchase gold monthly, including storage and insurance charges.
Further simply put we are the custodians of your physical gold. We file monthly GST returns showing the purchase of gold as sales to our customers and can not use the same gold as our stock in trade again.
This ensures the plan doesn’t fall under the legal category of “deposits,” unlike many other schemes.
Whereas other brands book the money received as advance from the customer hence using the money as a working capital invoking the risk of being identified as deposit beyond the limit of 365 days if the transaction not completed.
Therefore Aurel GPP is fully compliant with Indian laws and transparent in every aspect.
By purchasing gold directly each month, Aurel customers enjoy peace of mind knowing their holdings are secure and legally substantiated.
Conclusion
Aurel Gold Purchase Plan (GPP) redefines the way you invest in gold by focusing on real value, flexibility, and transparency. Unlike other brands that rely on temporary allurements resulting into high making charges for the customers, Aurel ensures every customer benefits from a clear and customer-centric approach to gold savings.
Disclaimer: The above views are personal and based on Aurel's understanding of market practices and legal frameworks.
