Indians historically held gold as jewelry. Today, there are at least four digital ways to own gold, each with different trade-offs. Here's a practical breakdown.
Sovereign Gold Bonds (SGB)
Issued by RBI on behalf of the government. 8-year tenure with exit option after 5 years. Additional 2.5% annual interest on top of gold price appreciation. Capital gains on redemption are fully tax-free. The best option for long-term gold exposure — but new issuances have paused, so you can only buy from the secondary market now.
Gold ETFs
Exchange-traded funds that hold physical gold and track the spot price. Bought and sold on stock exchanges like shares, so liquidity is excellent. Expense ratio is around 0.3–0.6%. Gains are taxed at slab rate regardless of holding period (post 2023 tax changes).
Gold mutual funds
Funds of funds that invest in gold ETFs. Slightly higher cost due to layered expenses but can be bought via SIP and from any mutual fund platform. Tax treatment same as gold ETFs.
Digital gold (apps like Paytm Gold, PhonePe Gold)
Fractional ownership of physical gold stored in vaults by MMTC-PAMP or SafeGold. Can start with ₹1. Convenient, but GST applies on purchase (3%), and there are storage fees after a period. SEBI doesn't regulate digital gold, so stick to established providers.
Recommendation
For long-term allocation (5+ years), buy SGBs from the secondary market. For tactical exposure or SIP convenience, gold ETFs or gold mutual funds. Avoid digital gold for large amounts — regulatory clarity is still evolving.