Digital Gold in India: Gold ETF, SGB, and Digital Gold Apps Compared

Gold Without the Hassle: That's Digital Gold

Indians love gold. We buy it for weddings, store it in lockers, and treat it as a generational safety net. But physical gold has always been messy. You pay making charges of 6–25%, worry about purity, pay for locker storage, and carry the constant risk of theft.

Digital gold solves all of this. You can buy gold starting from ₹1, skip the locker entirely, and sell it in seconds. But here's what most investors don't ask: which type of digital gold is actually best for you?

Investors make costly mistakes by treating all digital gold the same. They're not. The tax implications alone can swing your real returns by 5–10 percentage points over a decade, especially after the significant changes introduced by Budget 2024 and Budget 2026.

The Three Forms of Digital Gold in India

When people say "digital gold," they usually mean one of three things:

• App-based Digital Gold — Platforms like MMTC-PAMP, SafeGold, and Augmont let you buy 24K gold online; the physical gold is vaulted on your behalf.
• Gold ETFs — Units listed on NSE/BSE that track domestic gold prices. 1 unit ≈ 0.01 gram of gold, accessible from about ₹120–150.
• Sovereign Gold Bonds (SGBs) — RBI-issued government securities denominated in grams of gold, paying 2.5% annual interest. Note: new SGB tranches have been discontinued since February 2024.

There is also a fourth option — Gold Fund of Funds (Gold FoFs), which are mutual funds that invest in Gold ETFs. These are accessible without a Demat account but carry an additional cost layer. The tax treatment is the same as Gold ETFs.

App-Based Digital Gold: The Most Accessible, Least Efficient Option

Fintech platforms and others like MMTC-PAMP (backed by MMTC Ltd and MKS PAMP, Switzerland), SafeGold, and Augmont let you buy 24-carat, 99.9% pure gold starting from ₹1. The equivalent physical gold is stored in a secured vault on your behalf. You can later sell it back to the platform, take physical delivery, or convert it into jewellery through partner brands.

The cost problem:

• 3% GST is charged on every purchase — the same as buying physical gold jewellery. Gold ETFs and SGBs do not attract GST on the investor's transaction.
• Buy-sell spread: The difference between the buying price and the selling price is typically 2.5%–5%. This is a significant, often overlooked cost that erodes returns from day one.
• Storage charges: Most platforms offer free storage initially (commonly up to 5 years from the date of purchase), after which annual storage charges apply.

The regulation problem: App-based digital gold is not regulated by SEBI, RBI, or any other authority. In 2021, NSE and BSE directed their members (stockbrokers) to stop distributing digital gold on their platforms, citing that it falls outside the permitted scope of exchange members under the Securities Contracts (Regulation) Rules, 1957. In November 2025, SEBI explicitly issued a public caution reiterating that digital gold is unregulated, investors bear full counterparty risk with no regulatory recourse if a platform defaults.

Best for: Gifting, or accumulating small amounts specifically to take physical delivery later. For example, saving for wedding jewellery over several years. Not recommended as a core investment vehicle.

Gold ETFs: The SEBI-Regulated, Low-Friction Option

Gold ETFs are exchange-traded funds that invest in physical gold of 99.5% purity and list their units on NSE and BSE. One unit of most major Indian Gold ETFs represents approximately 0.01 gram of gold. With gold at around ₹15,300 per gram, 1 unit trades at roughly ₹150- 155, making it the most accessible entry point into regulated gold investing.

Major Gold ETFs in India (by AUM):

• Nippon India ETF Gold BeES (GOLDBEES) — India's first and largest Gold ETF, approximately ₹121 per unit, expense ratio ~0.81% p.a.
• SBI Gold ETF (SETFGOLD) — approximately ₹125 per unit, expense ratio ~0.65% p.a.
• HDFC Gold ETF, Kotak Gold ETF, Axis Gold ETF — also widely traded, similar unit structures and cost profiles.

Expense ratios for Indian Gold ETFs typically range from 0.5% to 0.9% per annum. Always check the current Total Expense Ratio (TER) on the fund's factsheet before investing, as SEBI allows periodic revisions.

Three structural advantages over app-based digital gold: No GST on purchase. No buy-sell spread (you trade at exchange price). SEBI-regulated with investor protection. These three factors alone make Gold ETFs structurally superior for investment purposes.

You do need a Demat account to invest in Gold ETFs. If you don't have one, Gold Fund of Funds on any mutual fund platform works as an alternative, with similar tax treatment and marginally higher costs due to the extra fund layer.

Also read about Silver ETFs here.

Sovereign Gold Bonds: The Best Historical Deal

Sovereign Gold Bonds used to be the single most compelling gold investment in India. Here is what they offered, and the two significant changes that have reshaped the case for them.

What SGBs offer:

• Issued by the Reserve Bank of India on behalf of the Government of India, denominated in grams of gold
• 2.5% interest per annum, paid semi-annually on the initial issue price
• 8-year tenure; premature exit allowed from the 5th year onwards on scheduled coupon payment dates
• Minimum: 1 gram; Maximum: 4 kg per individual or HUF per financial year; 20 kg for trusts and similar entities
• No GST on purchase, no storage cost, government-backed credit quality

The original advantage that made SGBs exceptional: If you held SGBs to maturity (8 years from the date of original issuance), capital gains were completely exempt from income tax under Section 10(15)(vi) of the Income Tax Act, 1961. No other gold product offered this.

Two critical updates that change the picture for new investors:

1. The RBI stopped issuing new SGB tranches. The last primary issuance was in February 2024. The government has indicated it has no plans to issue new tranches, as the scheme proved expensive; the government bears both the gold price appreciation and pays 2.5% annual interest. Existing SGB series continue trading on the NSE/BSE secondary market, but only at secondary market prices, which can carry a premium or discount to the prevailing gold price.
2. Budget 2026 narrowed the capital gains exemption. From April 1, 2026, the maturity exemption applies only to investors who subscribed during the original RBI issuance and hold continuously to maturity. If you buy SGBs from the secondary market, capital gains at maturity are no longer exempt, they are now taxed at 12.5% LTCG (without indexation), the same as Gold ETFs.

In practical terms: for any new investor today, SGBs available on the secondary market are tax-equivalent to Gold ETFs (both taxed at 12.5% LTCG at exit), with the additional disadvantage of lower liquidity and a thinner secondary market. The 2.5% annual interest income is still a genuine positive — but it is taxed at your slab rate, and the entry price on the secondary market can be at a significant premium.

Tax on Digital Gold: What Changed with Budget 2024 and Budget 2026

Two rounds of budget changes have overhauled how gold is taxed. Here is the current position:

Key changes: The Finance Act 2024 (effective July 23, 2024) reduced the LTCG holding period for gold from 36 months to 24 months and changed the rate from 20% with indexation to 12.5% without indexation. Unlike real estate, no indexation option was provided for gold. Budget 2026 further narrowed the SGB capital gains exemption to original subscribers only.

Side-by-Side Comparison

What Should You Actually Buy in 2026?

For most retail investors: Gold ETFs are the right default. They are SEBI-regulated, have no GST on purchase, offer near-instant liquidity during market hours, and track gold prices accurately. The expense ratio of 0.5–0.9% per annum is modest compared to the 3% GST plus 2.5–5% buy-sell spread on app-based digital gold. In rupee terms, you start 3–8% behind the moment you buy digital gold through an app. Gold ETFs start at zero.

If you already hold SGBs from an original RBI issuance: hold to maturity. The capital gains exemption still applies to original subscribers. This is a meaningful tax benefit, on a ₹5 lakh investment that doubles to ₹10 lakh, you save ₹62,500 in capital gains tax (12.5% of ₹5 lakh profit). Do not sell in the secondary market just to switch products; you'll sacrifice the exemption and pay unnecessary tax.

For SGBs via secondary market today: The 2.5% annual interest is still attractive — a bonus yield on top of gold returns. But weigh it against the higher entry price (secondary market premium), thin liquidity, and the fact that the capital gains exemption at maturity no longer applies for secondary buyers. For most people, Gold ETFs are cleaner and simpler.

Can avoid app-based digital gold as an investment vehicle. The 3% GST on entry plus the 2.5–5% buy-sell spread means you are already 5–8% behind a Gold ETF investor before you have earned a single rupee. On a ₹5 lakh investment, that is ₹25,000–40,000 in dead costs right at the start. Use app-based digital gold only if your end goal is physical delivery.

How to Buy Gold ETFs in India

1. Open a Demat account with a registered broker like Sahi, and start with the listed ETFs.
2. Search for "Gold ETF" or the specific ETF ticker (GOLDBEES for Nippon India, SETFGOLD for SBI).
3. Place a buy order during market hours (9:15 AM – 3:30 PM, Monday to Friday).
4. One unit costs approximately ₹150. You can start with a single unit or set up a systematic investment plan through your broker's SIP feature.

Do not have a Demat account? Invest through a Gold Fund of Funds on any mutual fund platform. The mechanics are similar to any mutual fund SIP, and the tax treatment is the same as Gold ETFs. The expense ratio will be marginally higher due to the additional fund layer.

How Much Gold Should You Hold in Your Portfolio?

Most financial planners and research from the World Gold Council suggest a 5–10% allocation to gold within a diversified portfolio. Gold is a portfolio hedge sd it tends to perform well during equity market corrections, INR depreciation, and periods of geopolitical uncertainty. It is not a primary return generator the way equities are.

In rupee terms, gold has delivered approximately 10–12% CAGR over the last decad, largely because the INR has weakened against the USD, and gold is priced globally in dollars. India is the world's second-largest gold consumer, accounting for roughly 26% of global gold demand annually, which provides structural price support domestically.

Think of gold as the seat belt in your portfolio, not the engine. A 5–10% allocation gives you meaningful protection during downturns without significantly diluting your long-term equity returns.

The Bottom Line

Digital gold has made gold investing more accessible, transparent, and — if you pick the right product — meaningfully more cost-efficient than physical gold. But the product landscape has changed significantly with Budget 2024 and Budget 2026, and investors who have not kept up may be paying more tax than necessary or holding the wrong product entirely.

The simple playbook for 2026: use Gold ETFs as your default gold allocation vehicle. They are regulated, liquid, GST-free, and track gold prices accurately. If you already hold original-issuance SGBs, hold to maturity and preserve the tax exemption. Skip app-based digital gold as an investment; the cost drag is too real to ignore.

Want to build a portfolio that balances gold, equity, and fixed income in the right proportions for your goals? Explore Sahi to get started with goal-based investing.