Be it for cultural reasons, future savings (for marriage, children’s education, etc.) or as an investment opportunity, Indian households hold significant gold — at around 25,000 to 30,000 tonnes of the asset as of March 2026. In fact, divided across 24 crore census households, on average each holds around 100-150 grams worth between ₹15-20 lakh at current prices, according to Sachin Sawrikar, Founder and Managing Partner of Artha Bharat Investment.
Notably, a Kotak Institutional Equities research report last month showed that gold stock with Indian households is nearing a whopping $5 trillion. Further, the value has skyrocketed amid steep increase in gold prices, accounting for a sizable 65% of the non-property stock of wealth with Indian households, it added.
If you’re use case for gold assets is not personal, there are other gold alternatives investors can consider exploring besides traditionally purchasing physical gold (i.e. gold jewellery, coins or bars). These include Gold Mutual Funds (MFs), Sovereign Gold Bonds (SGBs), Digital Gold or Gold Exchange-Traded Funds (ETFs).
Today, we explore what Digital Gold and Gold ETFs are and the difference between the two investment options.
What is Digital Gold?
According to a report by ClearTax, digital gold is conceptually not very different from physical gold. The big difference is that you can purchase digital gold online and the issuer stores them in a vault on your behalf.
Notably, India’s central bank the Reserve Bank of India (RBI) and markets watchdog the Securities and Exchange Board of India (SEBI) do not have regulatory authority over this investment.
It is however subject to income tax rules, where returns on digital gold held for over 24 months or longer, is termed under long-term capital gains (LTCG) at 12.5% with applicable cess; and less than 24 months (two years) is taxed under short-term capital gains (STCG) at rate as per your income slab, it added.
When it comes to sale of digital gold, the tax is similar to physical gold and paper gold (includes Gold ETFs, SGBs and Gold Mutual Funds).
What is Gold ETF?
Gold ETF is a commodity focused MF that invests in gold in the domestic market, as per another ClearTax report. For investors, each unit is equivalent to 1 gram of gold and traded similar to equities on the stock exchange. A key benefit of gold ETF is that it provides ownership of the precious metal without the hassles of safety and storage, while offering returns comparable to physical gold and convenience of stock trading for liquidity.
Notably, while gold ETFs are subject to LTCGs for a period longer than 12 months at 12.5% without indexation, while for shorter holdings it will be subject to 20% STCG.
How do Gold ETFs work?
- The asset management company purchases physical gold and secures it in vaults.
- Investors buy units of the ETF, where each unit is equivalent to 1 gram of gold.
- The Net Asset Value (NAV) of the ETF moves with market gold prices.
- It functions similar to a stock exchange where investors can buy or sell units as convenient.
Here’s an illustration: Investing ₹30,000 in a Gold ETF will buy you six units at cost of ₹5,000 each. This means you own six Gold ETF units worth ₹5,000 at market gold prices, which will fluctuate as and when prices rise or fall. At time of exit, your unit(s) can be sold on the stock exchange similar to selling shares.
What are the differences between Digital Gold and Gold ETFs?
| Features | Digital Gold | Gold ETFs |
|---|---|---|
| Ownership | You own physical gold stored securely in your name | You own units of a fund that tracks gold prices (not physical gold) |
| Mode of Purchase | Buy online via apps/websites | Buy through stock exchanges using a Demat account |
| Minimum Investment | Starts from as low as ₹1 | Cost of 1 unit |
| Gold Purity | Assured 24K, 999.9 purity | High-purity gold backed by the fund (varies by AMC) |
| Liquidity | Can buy or sell anytime | Liquid, but only during market trading hours |
| Storage & Security | Stored in vaults by the provider, usually at no extra cost | No physical storage needed |
| Regulation | Not uniformly regulated | Regulated by SEBI |
| Delivery Option | Can convert to physical coins/bars and get delivery | No physical gold delivery option |
| Source: ClearTax | ||
Key things to consider before investing in gold assets
No matter which option you choose, here are a key things to consider before investing in gold assets:
- Over the years, gold has delivered highest returns of around 10% over long-term holding, which means it is better to have it as a medium term investment.
- Check the fine print for any investment you make and understand the terms properly before signing on.
- Experts typically advice have gold comprise no more than 10% of your investment portfolio, so when making a choice, consider how you want to allocate, the use case and risk appetite.
- Gold investment usually comes with associated costs — making charges for jewellery, bank lockers or insurance for storage, brokerage fees for paper or digital gold, etc. — consider the pros and cons for your personal goals before making an investment decision.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
