If you are interested in investing in gold but do not want to go through the trouble of holding gold, you may have heard of two popular ways to invest in gold online: digital gold and gold ETFs. While both options allow you to invest in gold online, they are quite different and have different uses. In this article, we will discuss the main differences, costs, risks, and which one is best for you.
What Is Digital Gold?
Digital gold is an investment platform that allows you to purchase, sell, and hold 24-karat gold online. When you invest, your money is used to purchase physical gold, which is stored in secure vaults by the investment platform. You receive a digital receipt that proves you own the gold, and you can sell it back at any time or even take physical gold in the form of coins or bars if the platform allows it.
- You can invest in grams or rupees, depending on your budget.
- Most platforms guarantee 24-karat gold with 99.99% or 99.9% purity.
- Digital gold is not regulated by SEBI or RBI, so your protection depends on the platformโs reputation.
What Is a Gold ETF?
Gold ETF stands for Gold Exchange-Traded Fund. It is an investment fund that is linked to the price of physical gold. You purchase units of the Gold ETF on stock exchanges like BSE or NSE, just like you purchase stocks. Each unit represents a certain weight of gold that is stored in secure vaults.
- Gold ETFs are regulated by SEBI, so they offer more investor protection.
- You need a demat and trading account to buy and sell Gold ETFs.
- You can trade them anytime during market hours, and prices reflect the real-time gold price.
Key Differences Between Digital Gold and Gold ETFs
| Feature | Digital Gold | Gold ETFs |
|---|---|---|
| Regulation | Not regulated by SEBI/RBI | Regulated by SEBI |
| Ownership | Platform-backed claim | Units in demat account |
| Buying/Selling | Anytime on platform | During market hours |
| Minimum Investment | As low as โน1/โน100 | Usually 1 unit |
| Liquidity | Depends on platform policy | Depends on trading volume |
| Physical Delivery | Sometimes possible | Not possible |
Costs and Charges
- Digital Gold: You pay GST (3%), platform spreads (difference between buy and sell prices), and sometimes storage or insurance fees. If you want physical delivery, there may be extra charges.
- Gold ETFs: You pay brokerage fees when buying or selling, and the ETF charges an annual expense ratio. Thereโs no GST on ETFs.
Taxation
- Digital Gold: Short-term gains (less than 24 months) are taxed at your income tax slab. Long-term gains (24+ months) are taxed at 12.5% with indexation.
- Gold ETFs: Short-term gains (less than 12 months) are taxed at your income tax slab. Long-term gains (12+ months) are taxed at 12.5% without indexation.
Safety and Risks
- Both: Gold prices can be volatile due to market conditions.
- Digital Gold: Risk of platform failure, fraud, or operational issues. No formal grievance redressal since itโs not regulated.
- Gold ETFs: Risk of tracking errors, wide bid-ask spreads in low-volume ETFs, and annual expense ratios.
Which Should You Choose?
- For small, frequent buys: Digital gold is more convenient and has a lower entry barrier.
- For long-term, regulated investments: Gold ETFs offer better protection and are easier to trade.
- For physical delivery: Digital gold is the only option, but check the platformโs minimum weight and charges.
- For quicker LTCG classification: Gold ETFs qualify for long-term gains after 12 months, while digital gold takes 24 months.
Conclusion
Digital gold and gold ETFs both have their advantages and disadvantages. Digital gold is perfect for making small investments on a regular basis and if you want to have the ability to receive physical gold. Gold ETFs are better suited for long-term investments and if you want to trade on the stock market.
Learn More:
- How to Transfer Home Loan from One Bank to Another?
- How to Pay Electricity Bill through Credit Card
- How to Increase Credit Card Limit
- Home Loan Benefits for Women in India
- Best Banks for Gold Loan in India 2025
- Get SBI Yono Personal Loans? Helpful Tips to Get the Loan Fast
- 7-step checklist for fast ICICI Bank personal loan approval
- Airtel Payment Bank Loan: How to Get a โน5,000 Loan in Just Minutes
