Now, buy platinum in de-mat form :: Business Line

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Until recently, Indian investors could buy platinum only in the physical form.

The only option to invest in the metal was to buy it as jewellery or coin from the jeweller. This was not a lucrative option given the high additional charges over the actual price and the difficulty of safe-keeping.

Now there is a smarter way to invest. The National Spot Exchange (NSEL) has launched e-platinum, where platinum can be bought in units of one gram and stored in the account in de-mat form much like shares.

How does it work? E-platinum is an addition to the six commodities (gold, silver, copper, zinc, lead and nickel) already offered under the e-series of NSEL.

Each unit of e-platinum represents one gram of e-platinum (of 999.5 purity) and tracks platinum price at London Platinum and Palladium Market converted to rupees.

Buying/selling of the e-series units can be done online.

Trading is open from Monday to Friday between 10 a.m. and 11.30 p.m.

On purchase, physical units of the metal go into the exchange's vault in the name of the beneficial owner and respective units also get credited to the individual's demat account.

The buyer can take delivery of the units in physical form too as coins or bars from the delivery centres of the exchange.

To start with, the exchange proposes to offer delivery at Delhi, Mumbai, Jaipur, Ahemdabad and Hyderabad. Delivery of e-platinum in physical form is, however, only allowed in lots of 100 grams.

PROCESS OF INVESTMENT

To buy units of e-platinum one has to first open a trading account with one of the NSEL members and also a de-mat account with the exchange notified depositories.

The de-mat account used for equities will not be useful here. When buying units of e-platinum, one needn't pay the full amount at one go. The initial margin payable on buying an e-platinum unit is only 5 per cent (Rs 140 on the current price of Rs 2,841). Traders can close the position by squaring-off before end of day (short trades are not allowed).

However, those who intend to take de-mat delivery have to pay another 10 per cent as margin amount.

The total amount due can be settled in two working days or T+2 (for purchases before 1 p.m. on a trading day, one will have two days to settle).

CHARGES

Investors buying e-platinum units will have to, in-addition to brokerage, also pay a transaction cost that that is charged based on the individual's turnover (Rs 10 per lakh of turnover for delivery based transaction and Rs 5 per lakh of turnover for squared-off transactions).

Buyers who intend to take physical delivery of the e-platinum units would have to pay additional charges towards VAT, other local taxes.

Investments in e-series products are liable to wealth tax and also capital gains tax.

Short-term capital gains are taxed at your marginal tax slab rate while long term capital gains (if held over 36 months) are taxed at 20 per cent.