Ways to Invest in Digital Gold
Digital gold is gaining popularity in recent times amongst people who are looking for safe investment options. Gold has always been considered as a stable investment option, and the advantage with digital gold is that you can own gold without actually possessing it.
Read on to know more about the ways in which digital gold can be bought:
Sovereign Gold Bonds (SGBs):
Sovereign gold bonds are government securities introduced in the year 2015 under the Gold Monetization Scheme. These bonds are issued in small tranches by the Reserve Bank of India on government's behalf. Each bond is equal to 1 gram of gold and that is the minimum investment requirement. Those who are willing to invest in SGBs can buy it from the bank or directly from RBI. An individual is allowed to hold up to 4kgs of gold, Hindu Undivided Family (HUF) can hold up to 4 kgs of gold and charitable trusts can hold up to 20 kgs of gold. These gold bonds have a lock-in period of 8 years, however can be redeemed 5th year onwards from the date of issues. These bonds are tradable on stock exchanges. The SGB can be sold based on the closing price of 999 gold purity of the last 3 business days of the week from the date of repayment according to Indian Bullion and Jewellers Association Limited.
Benefits of investing in Sovereign Gold Bonds:
The benefits of investing in SGBs are as follows:
- These bonds are available both in paper as well as Demat form hence eliminating the risk of holding gold.
- These bonds can be used as collateral if you wish to avail yourself of a loan.
- Investors get exemption from capital gain taxes if these bonds are held till maturity.
- These bonds can be transferred to someone else.
- The SGBs offer attractive interest rates.
Gold Exchange Traded Funds (EFTs):
Gold Exchange Traded Funds are basically commodity-based mutual funds. EFTs, unlike SGBs, are backed by physical gold stored in custodian bank's vaults. That means the EFTs are a representation of gold commodity in dematerialised or paper form. Each unit of EFT is valued based on how the asset management company decides to allot the value of 1 gm of gold to each unit. EFTs can be bought from stock exchanges. Other than that, there are various asset management companies (AMCs) that distribute their own gold ETFs like AXIS Gold ETF, SBI Gold ETF, Nippon Gold ETF, etc. These funds are a good option for individuals having small capital and looking forward to gold allocation.
Benefits of investing in gold ETFs:
The benefits of investing in EFTs are as follows:
- EFTs assure 99.5% purity of gold.
- SEBI regulates the mutual fund industry, thus there is no risk involved.
- The EFTs have a very low expense ratio. For instance, the Nippon Gold ETF has an expense ratio of only 0.39%, thus making it an affordable purchase.
- EFTs can be easily used as collateral to avail yourself of a loan in times of need.
Reasons why investing in digital gold is a good option:
Read on to understand why digital investment is a lucrative option:
- Purity - The purity of gold purchased is a major concern for all those looking forward to making an investment in the precious metal. Earlier hallmarking was made compulsory in order to ensure gold purity. Investing in digital gold completely eliminates the need to check gold purity.
- Security issues - Holding physical gold can be very risky and needs to be stored in bank lockers. Investing in digital gold saves you from locker rents and security issues.
- Passive income - Investing in physical gold does not allow you to earn any additional interest or passive income, instead it requires an outflow of money if kept in lockers. However, in the case of digital gold investments like SGB, one can enjoy a passive income in the form of interest.
- Making charges - Investing in physical gold in the form of jewelry involves paying making charges. Whereas investing in digital does not involve any making charges.
- Better returns than in fixed deposits - Earlier people would invest in fixed deposits as that would double in five years. However, now the interest rates offered on fixed deposits have slipped way below the inflation levels (i.e. yielding negative real returns). That is why, investors have started shifting to better and safer asset classes.
FAQs on Ways to invest in Digital Gold
- How much is tax on digital gold?
If the digital gold is held in the wallet for a period of 3 years or more, it is "Long-Term Capital Gains" and is chargeable to tax @ 20% plus cess @ 4%. Indexation benefits will be available to the taxpayer while calculating long-term capital gains.
- Is it safe to invest in digital gold?
Digital gold is a convenient way of buying 24 carat gold backed by physical gold that is insured and stored in vaults that are monitored by a trusteeship company to safeguard customer interest.
- How much digital gold can I buy?
There is no upper limit on purchase of digital gold. However, the maximum limit to buy gold in a single day is Rs 2 lakh.
- Is digital gold costly?
A digital gold account comes at no cost apart from 3% GST. The digital gold price is the same across India, therefore you can buy and sell gold online at fully transparent, live market rates.
- When can you sell digital gold?
Customers can sell this gold at any time at live market rates, in either rupees or grams. They can also take possession of the gold in physical form such as coins or ornaments, adjusted for any making charges and packaging costs.
- Is digital gold regulated?
While the existing gold products like sovereign gold bonds and gold ETFs were regulated by SEBI and RBI, digital gold was outside the purview of regulation.
- What is digital gold?
Digital gold is a virtual way of investing in gold that does not require physical possession of the commodity.
- Can digital gold be converted to physical gold?
Yes, you can convert your digital gold into gold jewellery of your choice at thousands of jewellers across India at live prices.
Disclaimer
Credit Card:
Credit Score:
Personal Loan:
Home Loan:
Fixed Deposit:
Copyright © 2025 BankBazaar.com.