Gold has always been a trusted investment option in India, valued for its stability, liquidity, and cultural significance. Today, investors can choose from a variety of gold investment plans ranging from traditional physical forms to modern digital and government-backed options. Each has its unique features and benefits, and you can choose one to depend on your goals and comfort level.
Let’s explore the different ways you can invest in gold in India.
- Physical Gold
The most traditional form of investment, physical gold, includes jewellery, coins, and gold bars. While it offers emotional satisfaction and can be used or gifted, it also involves storage, insurance, and purity concerns. When buying physical gold, BIS-hallmarked gold is a must to verify authenticity and purity.
Physical gold is ideal for individuals who value tangible assets and prefer owning something they can physically hold. However, investors should be aware of making charges, wastage costs, and resale deductions that might affect overall returns.
- Gold Exchange-Traded Funds (ETFs)
Gold ETFs are securities traded on the stock exchange that track the price of gold. Each ETF unit usually represents 1 gram of gold. You can buy or sell them through a demat and trading account, making them one of the most convenient and transparent gold investment options.
Gold ETFs are regulated by SEBI, ensuring investor protection and transparency. They eliminate issues like storage, purity, and theft while providing market-linked returns that move in sync with gold prices.
- Sovereign Gold Bonds (SGBs)
Sovereign Gold Bonds are government securities issued by the Reserve Bank of India (RBI) on behalf of the Government of India.
The interest earned on SGBs (currently at 2.5% per annum) is taxable under the provisions of the Income-tax Act, 1961. It must be declared as “Income from Other Sources” in your tax return and will be taxed according to your applicable income tax slab.
Capital Gains Tax
- On Redemption (at Maturity): Any capital gains arising at the time of redemption of SGBs (when held until maturity by an individual) are exempt from capital gains tax.
- On Transfer (Before Maturity): If the bonds are sold or transferred before maturity, the investor may be liable for capital gains tax. In such cases, indexation benefits are available for long-term capital gains (if the holding period exceeds three years).
Tax Deducted at Source (TDS):
No TDS is applicable on interest payments or redemption proceeds of Sovereign Gold Bonds. However, investors must ensure compliance with all applicable tax regulations and report the income appropriately in their tax filings.
- Gold Mutual Funds
Gold mutual funds, also called Gold Fund of Funds, invest primarily in Gold ETFs. They are a good option for investors who do not have a Demat account. These funds can be purchased directly through asset management companies or mutual fund platforms.
They also allow SIPs, helping investors accumulate gold gradually over time. Returns are linked to gold prices, making this a suitable plan for those who wish to diversify their portfolios in a disciplined way.
- Gold Savings Schemes
Many jewellers offer gold savings or instalment schemes, where investors deposit a fixed amount monthly and receive jewellery or gold equivalent to the accumulated amount at maturity. These are best suited for individuals planning to buy gold jewellery rather than for investment returns.
SEBI does not regulate such schemes, so it is essential to deal only with reputed jewellers and understand all terms and conditions carefully before investing.
What is Sovereign Gold?
Sovereign gold generally refers to Sovereign Gold Bonds (SGBs), a government-backed digital form of gold investment. Instead of buying physical gold, investors purchase gold in the form of certificates issued by the Government of India through the RBI.
These bonds represent ownership of a specific quantity of gold and pay an additional fixed interest every year. On maturity, investors receive the value equivalent to the prevailing market price of gold. Sovereign gold thus combines the safety of a government security with the benefits of a gold-linked investment.
Documents Needed to Invest in Gold
The documentation required depends on the type of gold investment chosen:
- Physical Gold: Generally, no major documents are required unless the purchase exceeds ₹2 lakh, in which case PAN card details must be provided.
- Gold ETFs or Gold Mutual Funds: Require KYC documents such as PAN, Aadhaar, and proof of address. You’ll also need a Demat and trading account (for ETFs).
- Sovereign Gold Bonds: KYC documents are mandatory, including a PAN card, and can be submitted through banks, post offices, or authorised brokers.
- Digital Gold: Requires basic KYC verification, depending on the platform’s policy.
Why Should You Prefer Investing in Gold?
Gold remains one of the most reliable and time-tested investment options for Indian investors. Here’s why it deserves a place in your financial portfolio:
- Hedge Against Inflation: Gold prices often move inversely to inflation, protecting your purchasing power.
- Safe-Haven Asset: During economic slowdowns or market volatility, gold tends to retain its value.
- Liquidity: Gold can easily be converted into cash or traded on exchanges.
- Portfolio Diversification: Adding gold to your investment mix reduces overall portfolio risk.
- Universal Value: Gold holds global acceptance, making it an internationally recognised store of wealth.
Conclusion
Gold investments have evolved from simple jewellery purchases to advanced financial instruments like ETFs and Sovereign Gold Bonds. Whether you choose a gold investment plan through mutual funds, government bonds, or digital platforms, the key is to align it with your financial objectives and risk profile.
For long-term investors seeking stability and transparency, SGBs and Gold ETFs are considered among the best gold investment options. For those seeking flexibility or smaller ticket sizes, digital gold or gold mutual funds can be convenient choices.
