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‘Deposits Ordinance Does Not Cover Gold Schemes’

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Unregulated deposits banned to save investors from losing money to Ponzi, fake deposit schemes. The Centre’s recent ordinance banning unregulated monthly deposit schemes will not affect the ongoing monthly schemes operated by jewellery and chit fund firms, said tax practitioners.

Called the ‘Banning of Unregulated Deposit Scheme Ordinance’, it was promulugated by President Ram Nath Kovind during the last week of February 2019 to save gullible investors from losing money to Ponzi and fake deposit schemes. The ordinance makes such unregulated deposit schemes punishable, among other things.


Initially, the ordinance sent shock waves among the investors as most of them continue to invest their hard earned money in the monthly gold/silverware purchase schemes being operated by leading jewellery outlets.

“This ordinance is meant to take on fraudulent individuals and unregistered partnership firms from accepting deposits or services from gullible investors either in the form of advance or loan with or without interest. This would also include monthly chits and Diwali gift schemes among others. It is better to avoid any firm that is unregistered,” said R. Sapthagiri, a tax practitioner.

Tanishq has been operating the ‘Golden Harvest Scheme’ for a while now. It is a regulated scheme and hence the Ordinance would not affect its business model or its customers, said its regional outlet representative.

Kalyan Jewellers India Ltd. feels that this move would lead to a 25% revenue growth via its Dhanvarsha and Akshaya Scheme.

The consumption of gold by buyers in Tamil Nadu accounts for 400 tonnes, of which monthly schemes account for 140 kg, which translates to ₹4,600 crore. If these schemes are discontinued, then household savings would be diverted to buy luxury items, which would be of no long-term value to investors, argued Jayantilal Challani, president, The Madras Jewellers and Diamond Merchants’ Association.

On its part, the Chennai Jewellers Association took the help of legal counsel and decided to continue with its ongoing schemes.

“It is a well-planned purchase scheme in which our customers pay money in installments and collect gold or silverware at the end of 11th month. It is not a monthly deposit and we don’t have any hassles in continuing it,” said Uday Vummidi, vice president, Chennai Jewellers Association.

Gaurikanthan, director, Balussery Benefit Chit Fund, said its investors are not affected by the latest ordinance as the fund only accepts chit investment and cannot accept deposits.

The ordinance states that those who solicit deposits for an unregulated scheme can face jail time of 1-5 years and a fine of ₹2-10 lakh; 2-7 years with a fine of ₹3-10 lakh; 3-10 years and a fine of not less than ₹5 lakh and that could extend to twice the amount of deposits collected.

Courtesy: Hindu

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