As precious metals, especially Gold is one of the favourite instruments to invest in and trade in India, the debate remains the same about how should one invest in it — physically or digitally?
Indian households hold a mammoth 14 per cent share of global gold at 27,000 tonnes, and only 20 per cent of which is pledged, according to the IIFL Securities report. Precious metals such as Gold and Silver are considered one of the safest investment options by Indians with guaranteed returns.
As precious metals, especially Gold is one of the favourite instruments to invest in and trade in India, the debate remains the same about how should one invest in it — physically or digitally? Experts decode what should be the better way to invest in yellow metal with respect to tax and from a price point of view —
Expert: Naveen Mathur, Director – Commodities and Currencies, Anand Rathi Shares and Stock Brokers
Ways to invest in gold can be in the form of digital gold (ETF, gold bonds, etc) or by way of physical gold in the form of bars, coins, jewelry, etc.
Gold ETFs: They are open-ended mutual funds backed by 24-carat physical gold schemes. Investors must have a demat and trading account with a broker to invest in gold ETFs. The returns are benchmarked on the real returns on physical gold, subject to tracking errors. There are no deductions, except for exit load for a particular period holding.
Pros:
Transparency and liquidity;
Investment can be done in a staggered manner in Gold ETF;
Regulated by SEBI
Cons:
Tax implications;
Gold ETFs have a brokerage charge of around 1%;
Digital gold includes additional charges of 3% for storage, insurance fee, etc.
Sovereign gold bonds (SGB): Investing in SGBs is recommended for people who are looking to invest long-term and derive tax benefits earning a fixed interest rate. SGBs are bonds (denominated in grams of gold) backed by the Government of India.
Pros:
Fixed interest rate;
Tax exemptions on interest income & capital gains.
Cons:
Low secondary market liquidity;
Price inefficiencies;
Fixed-rate of tenure.
Physical Gold:
Pros:
Easy to get a Loan against physical gold;
Can be passed on to next generation over a longer duration.
Cons:
Making charges of 20 – 25 per cent;
3 per cent GST will be applicable on physical gold transactions;
Storage charges applicable;
Tax inefficient as compared to Gold ETF.
Source : https://www.zeebiz.com/personal-finance/news-how-to-buy-gold-digital-or-physical-gold-etf-sovereign-gold-bonds-gold-silver-outlook-2023-gold-price-today-215178