SGBs, ETFs or gold in digital form? What you should know before investing online in 2025
Investing in 2025 gold is no longer a question of visiting a jeweller or keeping coins under the mattress. Indians can invest in gold online due to the popularity of online investment platforms. However, each one of them has their advantages, tax norms, and disadvantages. Here's a comparison of the three so that you can pick the best.
Compare your options: Investing in gold is no longer simply buying jewellery or owning bars—digital gold is the buzz in 2025. But with so many alternatives like Sovereign Gold Bonds (SGBs), Gold Exchange Traded Funds (ETFs), and mobile app-based digital gold, it is important to know how they compare. They have varying tax benefits, risks, and return patterns. Which one to go for will depend on your investment goals and how long you want to hold on to your investment.
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How are SGBs, ETFs, and digital gold different from each other?: Sovereign Gold Bonds are government-guaranteed securities issued by the RBI and pay an interest of 2.5% per annum on the deposited amount and a tax-free capital gain if held to maturity (8 years). Gold ETFs are mutual fund-like products traded on the stock exchanges where each unit of the scheme represents a gram of gold. Digital gold lets you buy fractions of gold online, which are stored in insured vaults by institutions like MMTC-PAMP, but is not regulated at all.
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Which one offers better returns and tax relief?: SGBs are a winner for long-term investors—tax-free returns after maturity and 2.5% interest give the advantage. ETFs don't yield interest, and capital gains are taxable—20% after indexation if held for more than three years. Digital gold, even though handy, is taxed equally as physical gold—flat 20% after indexation or as per slab rate if before maturity. On net returns, SGBs will beat if taken to maturity.
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What then of liquidity and flexibility?: Gold ETFs are the most liquid—you can sell them right away during market hours on the stock market. Digital gold is also convenient, so you can invest or sell in small increments at any time via apps. SGBs, however, have an 8-year lock-in period, but early exit is available from the 5th year onwards or by selling them on exchanges (which may involve a price cut). Thus, your time horizon is a factor in selecting the optimum option.
Is there any cost or risk involved?: SGBs are low-risk, Government of India-guaranteed, and do not have to be kept in storage. ETFs have market risks and entail fund management costs and brokerage fees. Digital gold can have hidden storage or platform fees, and since it is not SEBI- or RBI-regulated, there is a risk in case the platform is shut down. Always cross-check the custodian and terms prior to using any app for digital gold.
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Which one should you choose?: If you're taking the long-term bet and require both returns and tax-free income, go for SGBs. If you require ready liquidity or plan to trade gold, use ETFs. When micro-saving or gifting is your requirement, digital gold may be the solution. But remember, just as with every investment, weigh your requirements and risk appetite carefully. And like with UPI, password-protect your digital channels with PINs and prudence—convenience never has to be at the cost of security.
