Compare Earnings of Jewellers Gold Saving Scheme vs Bank Fixed Deposit

Nowadays, almost all of the corporate Jewellers offers and recommends/requests you to join their Savings Schemes.  They major sell the scheme on the point of “Wastage Waiver” on your next Jewellery purchase in that scheme.  Here are some of the details that I gathered about these schemes and a quick math of comparison with that of earnings with a bank fixed deposit.

For the explanation, I’ve chosen GRT Golden Eleven Plan.  Below is a quick overview with an example of how this scheme really helps the customers.

  • Paying a monthly installment for 11 months
  • After the completion of 11 months, you can use your accumulated money to make jewellery purchase only
  • On your purchase, all the Wastage/VA charges upto 14% will be waived off.
  • If the Jewellery has more then 14% VA, say 16% VA, you need to pay the remaining 2% VA charges
  • If your jewellery costs more than your accumulated money, you need to pay remaining balance and you’ll get the VA charges waived off only to the portion of money you saved in the scheme.
  • To illustrate, say
    1. you paid Rs. 5,000 EMI for 11 months which becomes Rs. 55,000.
    2. You are purchasing Rs. 72,000 worth jewellery which has 14% VA charges. 
    3. Then you’ll have a waiver of 14% VA charges on Rs. 55,000 only.
    4. You require to pay the VA for remaining value of your purchase that is, Rs. 72,000 – Rs. 55,000 = Rs. 17,000.
    5. The 14% VA for Rs. 17,000 becomes Rs. 2,380.
    6. You overall require to pay Rs. 17,000 + 2,380 = Rs. 19,380.
    7. By entering into the Scheme, you’ll are saving the 14% VA on Rs. 55,000, that is Rs.  7,700.
    8. With this, you are buying an item of overall value Rs. 72,000 + 10,080 = Rs. 82,080 at Rs. 55,000 + 17,000 + 2,380 = Rs. 74,380.
    9. Your overall saving becomes Rs. 82,080 – 74,380 = Rs. 7,700.
  • Further, if you compare this returns with that of earnings from a bank recurring deposit, you’ll earn an overall of Rs. 2,106 from bank at an interest rate of 7.5% per annum. Further this earnings will be tax liable, if you are an income tax payer.

Here are some of the important terms and conditions of this scheme:

  • The advance payment cannot be extended beyond the 11 months period.
  • Advance payments should reach GRT before the 10th of every month.
  • Payments can be made by cash/DD/Local cheques/Post Dated cheques(PDC) At-par cheques/Electronic Clearing Service(ECS) and  online (www.grtjewels.com).
  • In the event of the member not making any one advance payment during the tenure, the plan will be discontinued automatically from that month, and will not be entitled for No Wastage (VA) as per terms mentioned above.
  • Members who choose to discontinue within 7 months of enrolment will not be eligible for No Wastage (VA) on purchase.
  • if the member discontinues during 8th 9th  & 10th month of enrolment, the member will be entitled to discount equal to 60% of Wastage (VA) value on the accumulated advance amount only.
  • VAT and any other Government levies will be borne by member at the time of redemption.
  • Yes Wastage (VA) will be charged on special items, like Diamond, Platinum, Uncut diamonds, Ethnic and Vintage Jewellery, Oddiyanam / Vanki, Pooja items and other special items not included in this list.
  • If you do partial redemption of your money, the remaining balance will remain in your account. You no longer receive No Wastage (VA) benefit if you have already claimed it in your first partial purchase.
  • If you have plans to make smaller value items, its better you join multiple savings schemes. say instead of single Rs. 5000 EMI, you can opt for Rs. 3000, Rs. 2000 schemes separately so that you can redeem them either separately or jointly.

   

A quick excel calculation to Compare Earnings of Jewellers Gold Saving Scheme vs Bank Fixed Deposit

Scheme Start Date 9/15/2015
Scheme End Date 8/15/2016
Scheme Duration 0 Years, 11 Months, 0 Days
EMI (Installment Money you pay every month) 5000
No.of EMIs (Number of Months you pay the EMIs) 11
Total Amount You Pay 55000
 Current Bank Interest Rate for Regular FD (Annual) 7.5
Month Number EMI Overall EMI Till that Month Bank interest Till Date Overall EMI with interest Till that Month
1 5000 5000 31 5031
2 5000 10031 63 10094
3 5000 15094 94 15188
4 5000 20188 126 20314
5 5000 25314 158 25473
6 5000 30473 190 30663
7 5000 35663 223 35886
8 5000 40886 256 41142
9 5000 46142 288 46430
10 5000 51430 321 51751
11 5000 56751 355 57106
  55000   2106 57106
Utilizing Chit fund to make more earnings
You can buy the Jewellery anytime after completion of 11 months 11
Case#1
Assumed 22K gold price/gram on the date of your purchase after 11 months 2500
Number of grams you can buy 22
Assume V.A (wastage) charges on your purchased item is 14%
Value of VA charges in Rupees 7700
Benefit you are entitled is “No Wastage” charges upto 14% for the amount you saved, that is 55,000  0% VA
Your effective benefit is saving of 14% VA, which is worth of  7700
   
   
Case#2
Assumed 22K gold price/gram on the date of your purchase after 11 months 2500
You want to buy a chain whose weight is (grams) 27.079
Overall value of your article/ornament in INR is 67697.5
Balance amount to be paid in INR is 12697.5
Assume V.A (wastage) charges on your purchased item is 10.1%
Value of VA charges in Rupees 6837
Benefit you are entitled is “No Wastage” charges upto 14% for the amount you saved, that is 55,000  5555
Value of VA charges in Rupees for remaining balance is 1282
Your effective benefit is saving of 10.1% VA, which is worth of  5555
   

 

Excel Sheet with Calculations:

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