How to Invest in Gold in India: Digital Gold vs Physical Gold Explained

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  By Gujju Ticks

  15 May, 2025

In Indian homes and hearts, gold has always had a special place. Gold is still one of the most reliable investment options in India, whether it is for weddings, holidays like Diwali and Dhanteras, or just a conventional way to save money. But the way we invest in gold has changed in the current digital era. Indians can now choose between digital and physical gold.

This blog will explain the distinctions between digital and physical gold, weigh the benefits and drawbacks of each, and assist you in selecting the best gold investment strategy for your needs.

Why Gold Investment is Popular in India

In India, gold is more than just a metal; it is a representation of prosperity, wealth, and stable finances. Indian investors continue to favor gold for the following reasons:

• Hedge Against Inflation: Even when inflation increases or the rupee depreciates, gold frequently maintains its value.

• Cultural Importance: In Indian customs and rituals, gold is essential.

• Easy Liquidity: Physical gold can be easily sold in pawn shops or local markets.

• Diversification: Including gold in your investment portfolio lowers risk.

What is Physical Gold?

The term "physical gold" describes the conventional form of gold, such as

• Gold Jewellery

• Gold Coins

• Gold Bars

These are available from banks, authorized dealers, and jewelers.

Pros of Physical Gold

1. Tangible Asset: For conventional investors, it's great because you can see and touch it.

2. No Digital Knowledge Required: Perfect for those who find online transactions uncomfortable.

3. Usability: Jewellery can be worn and used.

Cons of Physical Gold

1. Storage and Security: Risk of theft; requires lockers or safe storage.

2. Making Charges: Purchasing jewelry entails paying fees that are not refundable.

3. Purity Concerns: Unless purchased from authorized sellers, there is a risk of contaminated gold.

4. Resale Challenges: The buyer's deduction and the market rate determine the price.

What is Digital Gold?

A more recent investment option is digital gold, which allows you to purchase, sell, and hold gold online. Businesses that provide platforms for investing in digital gold include Paytm, PhonePe, Groww, and Google Pay.

When you invest in digital gold:

• You are purchasing real gold that the supplier keeps in safe vaults.

• As little as ₹1 can be your starting point.

• Digital gold can be turned into physical gold, with delivery options available.

Pros of Digital Gold

1. Low Minimum Investment: Start investing from ₹1.

2. Safe Storage: Your gold is stored in insured, secure vaults.

3. Easy to Buy/Sell: You can transact 24/7 using mobile apps.

4. Purity Assurance: Most digital gold is 24K with 99.99% purity.

5. Instant Liquidity: You can sell it any time at market rates.

Cons of Digital Gold

1. No Regulatory Oversight Yet: Not under SEBI or RBI regulation at the moment.

2. Limited Holding Period: For a maximum of five years, providers may provide free storage.

3. Indirect Costs: Certain platforms impose transaction or storage fees.

Digital Gold vs Physical Gold: Quick Comparison

Other Gold Investment Options in India

In addition to digital and physical gold, you may want to think about:

1. Gold ETFs (Exchange Traded Funds)

• Traded on the stock exchange.

• Backed by physical gold.

• Requires a Demat account.

2. Sovereign Gold Bonds (SGBs)

• Issued by the Government of India.

• Earn fixed interest (2.5% p.a.).

• Tax-free if held till maturity (8 years).

3. Gold Mutual Funds

• Invest in gold mining companies or gold ETFs.

• Professionally managed.

Which Gold Investment is Best for You?

Choose Physical Gold If:

• You need gold for personal use (e.g., jewellery).

• You prefer a tangible asset.

• You're investing long-term and don’t mind storage hassles.

Choose Digital Gold If:

• You want flexibility and convenience.

• You’re a new investor with a small budget.

• You prefer buying/selling from your phone anytime.

Consider SGB or Gold ETFs If:

• You want tax benefits and regular income.

• You’re looking for long-term appreciation.

• You are comfortable with online investing.

Taxation on Gold in India

Gold investment is subject to capital gains tax:

• Short-Term (Held < 3 years): Added to income, taxed as per your income slab.

• Long-Term (Held > 3 years): 20% tax with indexation benefit.

SGBs offer tax-free returns if held till maturity.

How to Start Investing in Digital Gold in India

1. Choose a Platform: Google Pay, Groww, PhonePe, Paytm, and so forth.

2. Complete KYC: Aadhaar information and a PAN card might be needed.

3. Start Small: Digital gold can be purchased for as little as ₹1.

4. Track Prices: Monitor gold prices before investing.

5. Set Goals: Use SIP (Systematic Investment Plan) options if available.

Conclusion

In India, gold is still a dependable and steady investment option. Depending on your risk tolerance, convenience, and financial objectives, you may decide to invest in physical or digital gold. Digital gold provides access to contemporary, safe, and adaptable investing—even with a small budget—while physical gold offers a more conventional strategy with cultural significance.

Diversifying into gold is a clever way to blend tradition and technology, especially for Gujaratis and Indians alike, especially with the availability of digital tools.