AVOID LITIGATION ON SERVICE TAX MATTERS WEF 1-7-2012

As you all are aware that many services will become taxable or come under service tax net w.e.f.01.07.2012. It is advisable to pay and to receive evidence of payment before 30.06.2012 to avoid any extra liability, contingency and disputes with regards to service tax. That n.no.25/2012 deals with the negative list already emailed which hereby exempts the following taxable services from the whole of theservice tax leviable thereon under section 66B of the said Act, namely:-

1.      Services provided to the United Nations or a specified international organization;

2.      Health care services by a clinical establishment, an authorised medical practitioner or  para-medics;

3.      Services by a veterinary clinic in relation to health care of animals or birds;

4.      Services by an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) by way of charitable activities;

5.      Services by a person by way of-

(a)     renting of precincts of a religious place meant for general public; or

(b)     conduct of  any religious ceremony;

6, Services provided by-

 (a) an arbitral tribunal to -

 (i) any person other than a business entity; or

(ii) a business entity with a turnover up to rupees ten lakh in the preceding financial year;

           (b)  an individual as an advocate or a partnership firm of advocates by way of   legal services to,-

         (i) an advocate or partnership firm of advocates providing legal services ;

        (ii) any person other than a business entity; or

        (iii) a business entity with a turnover up to rupees ten lakh in the preceding financial  year; or

     (c)  a person represented on an arbitral tribunal to an arbitral tribunal;

7.  Services by way of technical testing or analysis of newly developed drugs, including vaccines and herbal remedies, on human participants by a clinical research organisation approved to conduct clinical trials by the Drug Controller General of India;

8.  Services by way of training or coaching in recreational activities relating to arts, culture or sports;

  9.    Services provided to or by an educational institution in respect of education     exempted from service tax, by way of,-

(a)  auxiliary educational services; or

(b)  renting of immovable property;

10. Services provided to a recognised sports body by-

(a)  an individual as a player, referee, umpire, coach or team manager for participation in a sporting event organized by a recognized sports body;

(b)  another recognised sports body;

11.  Services by way of sponsorship of sporting events organised,-

(a)     by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, state or zone;

(b)     by Association of Indian Universities, Inter-University Sports Board, School Games Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat;

(c)      by Central Civil Services Cultural and Sports Board;

(d)     as part of national games, by Indian Olympic Association; or

(e)     under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme;

12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -

(a)  a civil structure or  any other original works meant predominantly for  use other than for commerce, industry, or any other business or profession;

(b)  a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

(c)    a structure meant predominantly for use  as (i) an educational, (ii) a clinical, or  (iii) an art or cultural establishment; 

(d)  canal, dam or other irrigation works;

(e)  pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or

(f)    a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act;

13.  Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

(a)     a road, bridge, tunnel, or terminal for road transportation for use by general public;

(b)     a civil structure or  any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;

(c)      a building owned by an entity registered under section 12 AA of the Income tax Act, 1961(43 of 1961) and meant predominantly for religious use by general public;

(d)     a pollution control or effluent treatment plant, except located as a part of a factory; or

a structure meant for funeral, burial or cremation of deceased;

14. Services by way of construction, erection, commissioning, or installation of original works pertaining to,-

(a)  an airport, port or railways, including monorail or metro;

(b)  a single residential unit otherwise than as a part of a residential complex;

(c)   low- cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;

(d)  post- harvest storage infrastructure for agricultural produce including a cold storages for such purposes; or

(e)  mechanised food grain handling system, machinery or equipment for units  processing  agricultural produce as food stuff excluding alcoholic beverages;

15. Temporary transfer or permitting the use or enjoyment of a copyright covered under clauses (a) or (b) of sub-section (1) of section 13 of the Indian Copyright Act, 1957 (14 of 1957), relating to original literary, dramatic, musical, artistic works or cinematograph films;

16. Services by a performing artist in folk or classical art forms of (i) music, or (ii) dance, or (iii) theatre, excluding services provided by such artist as a brand ambassador;

17.    Services by way of collecting or providing news by an independent journalist, Press Trust of India or United News of India;

18. Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accommodation below rupees one thousand per day or equivalent;

19. Services provided in relation to serving of food or beverages by a restaurant, eating joint or a  mess, other than those having (i) the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and (ii) a licence to serve alcoholic beverages;

20. Services by way of transportation by rail or a vessel from one place in India to another of the following goods -

(a)  petroleum and petroleum products falling under Chapter heading 2710 and  2711 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);

(b)  relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap;

(c)   defence  or military equipments;

(d)  postal mail or mail bags;

(e)  household effects;

(f)    newspaper or magazines registered with the Registrar of Newspapers;

(g)  railway equipments or materials;

(h)  agricultural produce;

(i)    foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages; or

(j)    chemical fertilizer and oilcakes;

21. Services provided by a goods transport agency by way of transportation of -

(a)  fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage;

(b)  goods where gross amount charged for the transportation of goods on a consignment transported in a single goods carriage does not exceed one thousand five hundred rupees; or

(c)   goods, where gross amount charged for transportation of all such goods for a single consignee in the goods carriage does not exceed rupees seven hundred fifty;

22. Services by way of giving on hire -

(a)     to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or

(b)     to a goods transport agency, a means of transportation of goods;

23. Transport of passengers, with or without accompanied belongings, by -

(a)  air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogralocated in West Bengal;

(b)  a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire; or

(c)    ropeway, cable car or aerial tramway;

24. Services by way of vehicle parking to general public excluding leasing of space to an entity for providing such parking facility;

25. Services provided to Government, a local authority or a governmental authority by way of -

(a)  carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement and upgradation; or

(b)  repair or maintenance of a vessel or an aircraft;

26. Services of general insurance business provided under following schemes -

(a)     Hut Insurance Scheme;

(b)     Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as Integrated Rural Development  Programme);

(c)      Scheme for Insurance of Tribals;

(d)     Janata Personal Accident Policy and Gramin Accident Policy;

(e)     Group Personal Accident Policy for Self-Employed Women;

(f)       Agricultural Pumpset and Failed Well Insurance;

(g)     premia collected on export credit insurance;

(h)     Weather Based Crop Insurance Scheme or the Modified National Agricultural Insurance Scheme, approved by the Government of India and implemented by the Ministry of Agriculture;

(i)       Jan Arogya Bima Policy;

(j)       National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana);

(k)     Pilot Scheme on Seed Crop Insurance;

(l)       Central Sector Scheme on Cattle Insurance;

(m)  Universal Health Insurance Scheme;

(n)     Rashtriya Swasthya Bima Yojana; or

(o)     Coconut Palm Insurance Scheme;

27. Services provided by an incubatee up to a total turnover of fifty lakh rupees in a financial year subject to the following conditions, namely:-

(a)  the total turnover had not exceeded fifty lakh rupees during the preceding financial year; and

(b)  a period of three years has not been elapsed  from the date of entering  into an agreement as an incubatee;

28. Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution -

(a)  as a trade union;

(b)  for the provision of carrying out any activity which is exempt from the levy of service tax; or

(c)   up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex;

29. Services by the following persons in respective capacities -

(a)  sub-broker or an authorised person to a stock broker;

(b)  authorised person to a member of a commodity exchange;

(c)   mutual fund agent to a mutual fund or asset management company;

(d)  distributor to a mutual fund or asset management company;

(e)  selling or marketing agent of lottery tickets to a distributer or a selling agent;

(f)    selling agent or a distributer of SIM cards or recharge coupon vouchers;

(g)  business facilitator or a business correspondent to a banking company or an insurance company, in a rural area; or

(h)  sub-contractor providing services by way of works contract to another contractor providing  works contract services which are exempt;

30. Carrying out an intermediate production process as job work in relation to -

(a)  agriculture, printing or textile processing;

(b)  cut and polished diamonds and gemstones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 of the Central Excise Tariff Act ,1985 (5 of 1986);

(c)   any goods on which appropriate duty is payable by the principal manufacturer; or

(d)  processes of electroplating, zinc plating, anodizing, heat treatment, powder coating, painting including spray painting or auto black, during the course of manufacture of  parts of  cycles or sewing machines upto an aggregate value of taxable service of the specified processes of  one hundred and fifty lakh rupees in a financial year subject to the condition that such  aggregate value had not exceeded  one hundred and fifty lakh rupees during the preceding financial year;

31. Services by an organiser to any person in respect of a business exhibition held outside India;

32. Services by way of making telephone calls from -

(a)  departmentally run public telephone;

(b)  guaranteed public telephone operating only for local calls; or

(c)   free telephone at airport and hospital where no bills are being issued;

33. Services by way of slaughtering of bovine animals;

34. Services received from a  provider of service  located in a non- taxable territory by -

(a)  Government, a local authority, a governmental authority or an individual in  relation to any purpose other than commerce, industry or any other business or profession;

(b)  an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or

(c)   a person located in a non-taxable territory;

35. Services of public libraries by way of lending of books, publications or any other knowledge- enhancing content or material;

      36. Services by Employees’ State Insurance Corporation  to persons governed    under the Employees’ Insurance Act, 1948 (34 of 1948);

 37. Services by way of transfer of a going concern, as a whole or an independent part thereof;

  38. Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets;

  39. Services by a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution.

On new regime of taxable services based on negative list and deemed service etc. coming into force or becoming effective w.e.f. 01.07.2012 many services shall become taxable which are not taxable under existing service tax provisions as of now

It is pertinent to point out that documentation and payment after 30.06.12 may cause disputes or litigation:

When service is not taxable till 30.06.12 but becomes taxable w.e.f. 01.07.12, it is advisable or suggested that to comply with the  documentation and payment before 30.06.12. In case of need advance payment can be made as agreed, or on estimate basis. If documentation for service rendered like raising of invoice, issue of credit note, or passing of invoice by service receiver, issue of cheque by service receiver, and receipt of cheque by service provider etc. is on or after 01.07.12, some disputes may arise as to taxability of service charges in view of new service tax regime.

Therefore, it is suggested that to avoid disputes or litigation with regards to taxability under new regime and disputes about rendering of service, invoicing, receiving payment etc. it is advisable to raise bills and receive payment before 30.06.12 and also to receive bills and make payment before 30.06.12.

When ST liability will be on receipt basis:

Particularly when tax liability will be on receipt or payment basis, it is more important to ensure that payment is made and received before 30.06.12. If payment is made/ received on or after 01.07.12, then the services which are not taxable up to 30.06.12 will also become taxable ,when tax liability is fixed based on receipt of payment by service provider.

Appraisal required:

It is desirable for service providers and service receivers both to make an appraisal to identify services which are presently not taxable but will become taxable w.e.f. 01.07.2012. In respect of such services documentation, and payment can be completed before 30.06.12.

The better course of action:

In respect of services which are not taxable till 30.06.12 and will become taxable w.e.f. 01.07.12 ,it is advisable to raise bills for month of June 2012 or quarter or other service period ending as on 30.06.12 well in advance and also to ensure that payment is made by service receiver well before 30.06.12. Deposit of cheque before 30.06.12 will avoid any doubt or confusion and will do away with litigation.

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NEW SERVICES UNDER REVERSE CHARGE IN SERVICE TAX WEF 01.07.2012

The Central Government vide Notification No. 19/2012-ST dated 05.06.2012 has announced Date of Introduction of new regime of most awaited Negative List approach in Service Tax, which will apply w.e.f. 01.07.2012 i.e. service tax would be applicable on all services except those mentioned either in the Negative List or in the Mega Exemption vide Notification No. 12/2012-ST dated 17.03.2012.

Reverse Charge in service tax is not a new concept. Under this scheme, service tax is payable by service recipient instead of service provider and in some cases service tax is partly paid by service recipient and party by service provider at the percentage prescribed in Act. Under this charge service receiver has to register himself under service tax. Further service receiver can not claim general exemption limit of Rs. 10 Lcs. So he has to pay even on few rupees of service received.

It will be very harsh on service receiver end where he has received services falls under this charge for only few hundred rupees but due to it he has to register himself in service tax and have to file service tax return on prescribed interval. Moreover under service tax act Nil return is also mandatory and every registered person have to file half yearly return.

The extent of service tax payable by the person who receives the service and the person who provides the service for the specified taxable services shall be as under:

Sl.No.	Description of a service	Percentage of  service tax payable by the person providing service	Percentage of service tax payable by the person receiving the service
1	in respect of  services  provided or agreed to be provided  by an insurance agent to any person carrying on insurance business	Nil	100%
2	in respect of  services  provided or agreed to be provided  by a goods transport agency in respect of transportation  of goods by road	Nil	100%
3	in respect of  services  provided or agreed to be provided  by way of sponsorship	Nil	100%
4	in respect of  services  provided or agreed to be provided  by an arbitral tribunal	Nil	100%
5	in respect of  services  provided or agreed to be provided  by individual advocate	Nil	100%
6	in respect of  services  provided or agreed to be provided  by way of support service by Government or local authority	Nil	100%
7	(a)   in respect of  services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on abated value. (b)   in respect of  services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on non abated value.	Nil 60%	100 % 40%
8.	in respect of  services  provided or agreed to be provided  by way of supply of manpower for any purpose	25%	75 %
9.	in respect of  services  provided or agreed to be provided  by way of works contract	50%	50%
10	in respect of  any taxable services  provided or agreed to be provided  by any person who is located in a non-taxable territory and received by any person located in the taxable territory(IMPORT OF SERVICES)	Nil	100%

the Following new Sections have been inserted for governing the Service Tax Legislature:-

1.         Section 65B – Definitions/ Interpretation of various Terms.

2.         Section 66B – Charge of Service Tax -  -  This is the new charging section of service tax. This section seeks to levy service tax at the rate of 12% on the value of all services, except services specified in the negativelist (in section 66D). These services would be chargeable to tax if these are provided by any person to any person.

3.         Section 66C – Determination of Place of Provision of Service – This seeks to empower the Central Government to make rules which will contain principles on the basis of which taxing jurisdiction of a service can be determined. These rules would be known as Place of Provision of Services Rules, 2012. From 01.07.2012, these rules come into effect, existing ‘Export of Services Rules, 2005’ and ‘Taxation of Services (Provided from outside India and received in India) Rules, 2006’ will be rescinded.

4.         Section 66D- Negative list of Services  -  This seeks to specify  the  list  of  such services which will be outside the ambit of service tax.

5.         Section 66E – Declared services   to charge service tax on service portion of 9 specified Deemed Sale.

6.         Section 66F – Principles of interpretation of specified description of Services or bundled Services

7.         Changes in reverse charge mechanism vide Notification No.15/2012-Service Tax dated 17.03.2012 & Changes in abatement rates vide Notification no. 13/2012-ST dated 17.03.2012 à effective from 1st July 2012.

8.         Mega Exemption Notification vide Notification No. 12/2012-ST dated 17.03.2012  effective from 1st July 2012.

9.         Valuation for works Contract Services vide Notification no. 11/2012-ST dated 17.03.2012  effective from 1stJuly 2012.

Certain provisions under the old Sections will cease to operate from 01.07.2012 vide Notification no. 20/2012-ST,21/2012-ST,  22/2012-ST and 23/2012-ST dated 05.06.2012:-

1.         Section 65 – Definition of Taxable Service

2.         Section 65A – Classification of Taxable service

3.         Section 66 -Charge of Section Tax

4.         Section 66A – Charge of Service Tax on Services received from outside India

Service Tax Rate
Due Date of Payment of Service Tax
Applicability of Service Tax and Its Registration
Additional Services Under Reverse Charges w.e.f 07.08.12

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Difference between Systematic Investment Plan (SIP) and Systematic Transfer Plan (STP)

Systematic Investment Plan (SIP):

SIP is way of investing in Mutual funds monthly, where a fixed amount of money is invested in Mutual Fund. The SIP amount is debited from once bank account on specific dates (as set by investor). So, if investor wants to a SIP of 1,000 for 1 yr, it means that every month on a fixed date (chosen by investor) 1,000 will be invested in a Fixed Mutual fund of his/her choice. For small investor it is advisable to enter in stock market through mutual fund SIPs, Investment in SIP could be done together with systematic transfer (STP) from fixed-income schemes would be the best options as it will generate good returns over a long term.

Systematic Transfer Plan (STP): 

 In case of SIP, the amount is debited from your bank account for a new investment every month, while in case of in STP, the amount is transferred from one mutual fund scheme into another.

Investment by way of STP could be the best option when one wants to invest big lump sum money in stock market, as market is volatile and can go up or down very soon, so there is always a risk of losing a big part of investment, if after investing market goes down. As an investor everyone wants to minimize risk and get decent return. Hence, in STP lump sum amount of money is first invested in a mutual fund probably in debt fund and then a fixed sum is transferred from that mutual fund to another fund.

In case of SIP fund is monthly transfer from bank to mutual fund, whereas in case of STP fund can be transfer weekly, monthly or quarterly on the choice of investor.

Working of STP is in the way that, all money is actually invested first in a Mutual funds itself (probably Debt) and units from mutual fund in which money is first invested are sold every month and reinvested another Mutual fund (probably Equity) or vice versa.

Also, while there is no entry load for SIP, you may have to pay switching charges for STP.

Highlight points on STP

When to invest in STP:

 Investment in STP by way of DEBT to EQUITY is done when markets are very volatile and one don’t want to take risk with your money in a short span of time, This is still better than putting money in Bank and doing a SIP, because at least you money is earning some returns on debt part in STP.

When not to invest in STP:

When the markets are in rising trend i.e. at the end of correction in market, in that case STP will not deliver the best returns like SIP, one time investment is a good choice in that case. But then you never know that when will markets start go up. But mainly in case of retail investor as they do not have all tools and time to research the markets, it’s not advisable to invest lump sum in any case.

   

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Income Tax Exemption on Housing Loan

Investment in house property is considered to a good investment as the property price rises annually and one can earn handsome money by way of investment in house property. On the other hand what makes investment in house property more attractive is the significant tax exemption available on repayment of home loan.

As per Sec 24(b) of the Income Tax Act, 1961 in India a deduction up to Rs. 150,000 can be claimed as tax exemption on housing loan. This deduction is claimed towards the total interest that we pay on the home loan towards purchase or construction of house property while computing the income from house property.

Loss from House Property in case of self occupied property:

Suppose a person purchase or constructed a house property by taking a loan from any financial or non financial institution. He is require to pay EMI for repayment of the loan & each EMI must contain principal or interest or both as per rule.

Suppose the person use the above property for his own residence as self occupied property.

As per sec 24(b) of the Income Tax Act, 1961, the maximum amount of interest allowable in case of self occupied residential property is Rs. 1,50,000 (if the loan is taken on or after 1^st April, 1999) or Rs. 30,000 (if the loan is taken before 1^st April 1999).

Hence, during repayment of home loan any amount paid for interest on loan is to be taken as loss from house property & to be set off as current year loss to the extent of limit u/s 24(b) from any income from Salary or Business or Profession or any other sources.

Some important points regarding deduction of interest on home loan:

1.       Deduction of interest u/s 24(b) is made only to the extent of interest payable during the year.

2.       Interest payable on outstanding interest is not deductable.

3.       Deduction for interest on loan u/s 24(b) is allowable to the assessee who took the loan for construction or reconstruction but not allowable to the successor of the property.

4.       If the tax payer takes the fresh loan to close the earlier loan, the interest paid on fresh loan is also to be set off as current year loss u/s 24(b).

5.       If any person & his/her spouse jointly took a house building loan & if both are assessable under income tax act, 1961, they can claim maximum amount of deduction of Rs. 1,50,000 in each file, total interest paid or payable during the year is to be apportioned between the co-owners.

Deduction for interest on House Building Loan in pre- construction period:

If loan is taken before construction, interest paid or payable in pre-construction period and before acquisition of the property. Deduction should be allowed on total interest in five equal installment starting from the year construction or acquisition is completed.

Principal repayment of the home loan

As per the newly introduced Sections 80C read with section 80CCE of the Income Tax Act, 1961 the principal repayment up to Rs. 100,000 on your home loan will be allowed as a deduction from the gross total income subject to fulfillment of prescribed conditions.

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Investment in Gold.

In India gold is considered to be traditional method of investment by most of the individual. Almost every individual home has little bit of it. India is considered to be largest consumer of gold.

Investment in gold makes portfolio stabilized and protect it against market fluctuations. We all have seen in recent past, at the time of recession, though all other investment tool was giving negative return, gold emerged with positive return. As per statistics during the last 10 year, among the other investment tool available in market, like Nifty, PPF, Saving Bank Account, Fixed deposit etc. gold gave the highest return on investment i.e around 18.5%.

Gold is also considered as hedge against inflation, when inflation rises, value of precious metals also increases and hence they can be effectively used as a tool to hedge against inflation.

As compared to other class of assets gold is considered to be highly liquid assets. Even during any time of crises gold can be sold easily as this is considered to be valuable and it is easy to find its buyer easily. In India gold is considered as a sign of security as at any time these precious metal retain its value and earn reputation as safe investment.       

Gold is recognized worldwide as an underlying assets has got its intrinsic value and thus can be sold for same value in any part of the world. Gold can also be pledge for loan, loan against gold is easily available without much of documentation. There are many companies which offer loan against gold. Rate of interest on gold loan is much lower than any other loan.

Percentage of investment in gold varies from person to person depending on ones goal and investment objective. Many experts suggest that an individual should invest around 5 % to 15% of his portfolio in gold.

How to make investment in gold

When question comes for investing in gold people believe buying them in physical form or jewellery, but today there are numbers of other safe, secured and hassle – free ways to invest in gold.

a.       Buying in physical form: Investment in gold can be made by way of buying them in physical form i.e. in form of gold coins and bar through bank and jewellary. This method of investment is the simplest form but by this method one end up paying a premium for gold coins or bar purchased from bank and jewellary charges extra as making charges.

b.      Exchange traded fund, ETF : Gold ETF (Gold Exchange Traded Funds) are mutual fund listed on National Stock Exchange of India (NSE) and BSE. Buying Gold ETF is purchasing gold in electronic form. You can buy or sell them just like you buy or sell stock of company through your broker on NSE.

Benefits of Gold ETF:

(i)                  You can buy just one unit, each unit is equal to one gram.

(ii)                It is very easy to buy and sell.

(iii)               Quality can be assured.

(iv)              Accepted as collaterals for loans.

(v)                No worries for theft.

There are no silver ETFs in India as of now.

c.       Future trading on commodity exchange: If you are a speculator or a trader, then in India you can trade gold and silver futures which are traded on the National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX).

d.       E-gold and E-silver: National Spot Exchange Ltd (NSEL) has launched a unique investment product in gold and silver on its platform, named e-gold and e-silver.

It provides an opportunity for small investors to invest in gold and silver in smaller denominations of 1 gram for gold and 100 grams for silver and in multiples thereof in demat form.

e.      Investing in shares of gold mining companies: This is an indirect way of investment in gold via the equity route, by purchasing shares of gold mining companies.

With the rise in the price of gold , the profits of the gold mining company could be expected to rise and as a result the share price may also rise.

However, there are many factors to take into account and it is not always the case that a share price will appreciate when the gold price increases. It also depends on overall market movement and overall economic scenario and performance of company.

Note: If you are considering an investment in gold, it is important to appraise yourself of the best options for your specific needs.

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