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      Question

      Consider the following statements: 1. Gold

      exchange traded funds are better for tax saving as compared to physical gold. 2. Increase in investment in gold ETF will increase the current account deficit. Which of the statements given above is/are correct?
      A 1 Only Correct Answer Incorrect Answer
      B 2 Only Correct Answer Incorrect Answer
      C Both 1 and 2 Correct Answer Incorrect Answer
      D Neither 1 nor 2 Correct Answer Incorrect Answer

      Solution

      • Statement 1 is correct: Gold ETF, or Exchange Traded Fund, is a commodity-based Mutual Fund that invests in assets like gold. These exchangetraded funds perform like individual stocks and are traded similarly on the stock exchange. Exchange-traded funds represent assets, in this case, physical gold, both in dematerialised and paper form. • Some of the benefits of investing in Gold ETF funds are: Easier trading è No entry or exit loads Less Market Risk Tax benefits – Other than capital gains tax, gold exchange traded funds do not attract VAT, Securities Transaction Tax or Value Added Taxes, allowing an individual to save taxes on their investment. Usage as collateral • Statement 2 is incorrect: Also investment in gold ETF will help decrease the current account deficit as gold imports will reduce.

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