What Is a Silver ETF? How It Works, Top Funds in India & Tax Rules
Silver ETFs give you exposure to physical silver through a demat account, with no storage and no making charges. Here's everything you need to know before investing.
A Silver ETF is an exchange-traded fund that holds physical silver (99.9% pure) as its underlying asset. Each unit represents approximately 1 gram of silver, currently priced at around ₹220-₹240t, per unit (June 2026). You buy and sell units on the NSE or BSE through a demat account, just like stocks. Prices track the domestic silver rate in real time, giving you clean, liquid exposure to silver without the cost and hassle of storing physical metal.
Silver has always been a part of Indian household savings, in coins, utensils, and jewellery. But holding physical silver comes with real problems: storage, theft risk, making charges, and poor liquidity when you need to sell. Silver ETFs, introduced in India in 2022, solve all of these. They give you electronic, exchange-traded exposure to silver at a fraction of the friction.
What is a Silver ETF?
A Silver ETF is a mutual fund scheme regulated by SEBI that invests at least 95% of its assets in physical silver with a purity of 99.9%. SEBI requires the silver to conform to LBMA Good Delivery Standards, 30 kg bars of 999 fineness. The AMC holds the actual silver through an appointed custodian, typically a bank vault. The fund then issues units that trade on the NSE or BSE, priced at approximately the value of 1 gram of silver.
SEBI formally approved Silver ETFs through a gazette notification on November 9, 2021 (effective December 9, 2021). The first Silver ETFs were launched in early 2022; ICICI Prudential Silver ETF opened its NFO on January 5, 2022, followed by Nippon India Silver ETF in February 2022.
How does a Silver ETF work?
When you buy a Silver ETF unit:
- The AMC uses the collected money to purchase physical silver from approved sources.
- The silver is stored in a custodian vault (usually an authorised bank).
- You receive units in your demat account representing your share of that silver holding.
- During market hours (9:15 AM – 3:30 PM IST), units trade on the exchange, and prices move with the domestic silver price.
- You can sell your units anytime during market hours at the prevailing market price.
Top Silver ETFs in India
| Fund Name | AMC | Approx. Expense Ratio |
|---|---|---|
| ICICI Pru Silver ETF | ICICI Prudential MF | ~0.34–0.40% |
| Nippon India Silver ETF | Nippon India MF | ~0.49–0.55% |
| Mirae Asset Silver ETF | Mirae Asset MF | ~0.34–0.39% |
| Aditya Birla SL Silver ETF | Aditya Birla SL MF | ~0.25–0.40% |
| Axis Silver ETF | Axis MF | ~0.45% |
Note: Expense ratios are approximate and change periodically. Always check the fund's current fact sheet on the AMC website before investing.
Silver ETF vs Physical Silver vs Gold ETF
| Feature | Silver ETF | Physical Silver | Gold ETF |
|---|---|---|---|
| Purity | 99.9% guaranteed | Variable | 99.5% guaranteed |
| Storage | None needed | Safe/locker required | None needed |
| Liquidity | High — sell any market day | Low | High — sell any market day |
| Volatility | Higher than gold | Higher than gold | Lower, more stable |
| LTCG holding period | 12 months (listed ETF) | 24 months | 12 months (listed ETF) |
| LTCG tax rate | 12.5% (no indexation) | 12.5% (no indexation) | 12.5% (no indexation) |
Why silver is more volatile than gold
Silver has a dual nature. It is both a precious metal and an industrial commodity. According to the Silver Institute's World Silver Survey 2025, industrial demand in 2024 reached a record 680.5 million oz, roughly 59% of total global silver demand, up from around 53% a decade ago. Industrial applications include solar panels, electronics, semiconductors, medical equipment, and electric vehicles.
This means silver prices react not just to safe-haven demand (like gold does) but also to global economic cycles and industrial output. When economies are growing and industrial production is strong, silver tends to outperform gold. In downturns, it can fall sharply. This makes silver a higher-risk, higher-potential-return investment compared to gold.
Tax on Silver ETFs (Finance Act 2024 rules)
Listed Silver ETFs traded on NSE/BSE are classified as listed securities for tax purposes. The Finance Act 2024 (effective July 23, 2024) set the following rules:
- Holding period for LTCG: 12 months for listed Silver ETFs.
- LTCG tax rate: 12.5% without indexation on all gains.
- STCG (held less than 12 months): Gains added to total income and taxed at your applicable slab rate.
- No ₹1.25 lakh exemption: Unlike equity ETFs, there is no annual exemption threshold. The entire gain is taxable at 12.5% once the 12-month holding period is met.
Note: Silver Fund of Funds (unlisted, not traded on exchange) has a 24-month LTCG threshold. Physical silver also remains at 24 months. The 12-month threshold applies specifically to listed Silver ETFs.
Who should invest in Silver ETFs?
Silver ETFs are suitable if you:
- Want a small allocation (5–10%) to precious metals beyond gold.
- Believe in the long-term demand story for silver driven by solar energy and EV growth.
- Are comfortable with higher volatility compared to gold in exchange for potentially higher returns.
- Want to avoid the practical hassles of physical silver (storage, making charges, purity concerns).
Silver ETFs are not suitable for conservative investors looking for stable, low-volatility preservation of wealth; gold or debt funds are better suited for that purpose.