MC EXPLAINER Digital gold: What you should know before investing

Digital gold works well for investors who value convenience, small investment thresholds, and easy access. It can be a good way to save gradually. However, Rajani cautions, “For long-term wealth creation or significant allocations, we suggest investors avoid digital gold due to its hidden costs such as higher spreads, storage charges embedded in pricing, counterparty risk, and the absence of regulatory safeguards comparable to market-linked instruments.”

Gold was back on focus in 2025, thanks to the volatility in stock markets and rising global uncertainties. New ways to invest in gold, like digital gold, are catching on. According to a recent Moneycontrol report based on NPCI (National Payments Council of India) data, India’s digital gold market recorded year-to-date trading volumes of 940.56 million transactions, with total value exceeding Rs 12,471 crore up to November 2025.

Also read: Digital gold volumes cross 940 million YTD; November value declines

Digital gold makes buying and holding gold simple, but it also comes with its own set of costs, risks, and regulatory gaps. Here’s a closer look at what investors need to know.

What Is digital gold?

In simple terms, digital gold lets you invest in gold without physically holding coins or bars. It’s gaining popularity because it allows small starting amounts, with some platforms accepting investments as low as a Rs 10 . In the process, gold is stored in insured vaults, so investors don’t have to worry about keeping it at home, and you can buy or sell it online, without visiting a physical jewellery store.

Investors can purchase digital gold through apps like Paytm, PhonePe, Google Pay, and Amazon, or through jewellers like Tanishq, Malabar Gold & Diamonds, and Kalyan Jewellers.

These platforms buy physical gold on behalf of the investors and store it in secure, insured vaults. Ownership is recorded electronically, so that investors can track it, sell it, or convert it into physical gold whenever they want. Shweta Rajani, Head of Mutual Funds at Anand Rathi Wealth, explains that unlike exchange-traded products, digital gold prices are not set in an open market. She says, “During volatile market conditions, platforms may widen buy–sell spreads or adjust sell prices, which can result in less favourable exit prices for investors.”

Sebi’s advisory

Digital gold is not regulated by the Securities and Exchange Board of India (Sebi), unlike gold Exchange-traded Funds (ETFs) or sovereign gold bonds. This lack of regulation affects transparency and investor protection. In November 2025, Sebi cautioned the public, clarifying that digital gold products offered online fall outside the securities and commodity frameworks. The regulator noted that investors cannot rely on the protections available to regulated instruments and must depend entirely on the platform and the vault custodian.

How to start and what it costs

Getting started with digital gold is straightforward. After choosing a provider, such as Paytm, PhonePe, or Google Pay, download the app, register yourself, and verify your identity, using a government-issued ID. Linking your bank account or UPI helps completes the setup.

There are multiple layers of costs involved. The price an investor can see in the app usually includes a platform margin and 3 percent GST (Goods and Services Tax) at purchase. For example, an investment of Rs 10,000 may include around Rs 300 in GST and another Rs 300 as an embedded spread.

When selling, the platform may apply a spread (Difference between purchase and sale price) of 2–3 percent or more. Storage is often free for a limited period, but the cost is embedded in pricing. If one converts digital gold into physical coins or bars, additional making charges, delivery fees, and GST apply.

Rajani notes, “The embedded spread in digital gold covers costs, such as storage, insurance, vaulting, platform fees, and the service margin charged by the provider. These are costs investors often don’t see upfront.” Taxation for digital gold mirrors that of physical gold. Short-term gains within 24 months are taxed at your income tax slab, while gains after 24 months are taxed at 12.5 percent without indexation.

Platforms and providers

Platforms such as Paytm, PhonePe, Google Pay, and Amazon act as the interface for buying and selling digital gold. Physical gold is sourced and verified by providers like MMTC-PAMP, SafeGold, and Augmont, and stored in insured vaults operated by partners such as Brinks India and Loomis India.

Who should invest?

Digital gold works well for investors who value convenience, small investment thresholds, and easy access. It can be a good way to save gradually. However, Rajani cautions, “For long-term wealth creation or significant allocations, we suggest investors avoid digital gold due to its hidden costs such as higher spreads, storage charges embedded in pricing, counterparty risk, and the absence of regulatory safeguards, comparable to market-linked instruments.”

Risks and considerations

Digital gold carries operational and counterparty risks. Platform issues or problems with vault partners can delay access to one’s gold, and liquidity depends on the platform, which may widen spreads during volatility. Implicit costs and limited transparency make it difficult to know exact returns. Most platforms allow conversion into physical coins or bars, but this comes with extra charges, delivery timelines, and minimum quantity rules, making it less convenient than keeping it digitally or investing through ETFs.

Digital gold vs other gold investments

Digital gold is extremely convenient but lacks the regulation, transparent pricing, and liquidity of ETFs or mutual funds. On the other hand, Gold ETFs are Sebi-regulated, exchange-traded, and priced through open markets, providing clear costs and liquidity. There are around 27 gold funds currently (gold MFs and ETFs), including Nippon India Gold Bees, SBI Gold ETF, HDFC Gold ETF, Tata Gold ETF FoF, Quantum Gold Savings Fund, and Axis Gold Fund. Short-term gains are taxed at your slab rate if held up to 12 months for ETFs or up to 24 months for mutual funds/FoFs, while long-term gains are taxed at 12.5 percent without indexation.