What is Digital Gold- Is It safe to invest in Digital Gold in India?

Digital Gold Investment

Digital Gold Investment

Investing in digital commodities and financial instruments can be helpful to widen your investment portfolio. Mainly, investing in digital gold is a highly advantageous option!

Gold has always been a go-to investment choice for Indians. While investing in physical gold, like gold coins/bars or jewels, requires a lump sum of money, digital gold comes as a deliverance for those who want to invest in gold in small payments.

Although still now purchasing physical gold in the form of jewels is the preference of Indians, a Fortune India article says that there has been an eight-fold increase in digital gold investment in India since 2020.

If digital gold is a nascent concept to you and you are feeling uncertain about its benefits and risks involved, this article will help you understand digital gold in a better way.

What is Digital Gold?

Digital gold is investing/buying the virtual form of gold without having to hold them physically under our security. Instead, the digital gold will the stored safely in insured digital vaults by the sellers under the buyers’ ownership.

You can buy digital gold online from various digital investment and wallet apps. And the minimum buying value starts from one rupee. Additionally, all digital gold is 24 Karat, 100% pure and certified by the government. So with digital gold, there is no chance of fraud or impurity.

Digital gold is also highly liquid. You can easily buy or sell it anywhere and anytime. There is no minimum lock-in period. You can choose to sell or redeem it entirely or in portions at any time. If you decide to redeem the digital gold in physical form, you can ask the seller to convert it into physical gold coins/biscuits and get it delivered to your doorstep. Moreover, you can use the digital gold bought as collateral for online loans.

Is Digital Gold a Financial Product?

No, digital gold is neither a deposit nor a financial product. It is just a tool to purchase and sell the purest form of gold in digital form at the transaction date’s market price. For example, if you are buying 10gms of digital gold today at the prevailing market price with a digital wallet company, the company will allocate the same 10gms of physical gold under your name that is stored in its certified vault.

Whenever you want to convert your gold into physical form, you can ask the seller to convert your digital gold holding into physical coins, bars or jewellery and get it delivered to you. You will need to pay making charges accordingly. Or else, if you want to liquidate your digital gold, you can resell it to the seller and get back your money according to the market prices.

Is Digital Gold Investment in India Safe?

In India, buying and investing in digital gold in India is legal and approved by the government. India has three digital gold vault companies approved by the government- a) Augmount Goldtech, b) MMTC-PAMP India (a joint venture between government-owned MMTc and Swiss company MKS PAMP) and c) SafeGold – Digital Gold India.

Only these three stated companies have the right to sell or purchase digital gold legally. The online investment portals and digital wallets like Spare8, Paytm, Groww, Gpay and other jewellers offering digital gold trading are tied up with any of these companies.

But digital gold is still a developing concept in India, and the government is working towards its regulations. Currently, it does not come under the purview of any financial sector regulator, so digital gold is in a regulatory grey zone as there is no authority to monitor the process of selling, securing, storing and managing digital gold sales.

And due to this, digital gold investment in India also carries risks, like mutual funds. The risk can be avoided if you can thoroughly check on the integrity, credibility, reputation and business model of the digital gold provider and then invest.

Various Forms of Digital Gold Investment in India:

1). Investment and Wallet Apps

Fintech companies promoting digital investment and wallets through their apps like Spare8, Google Pay, Paytm, or Groww also sell digital gold in India.

2). Jewellers

Acclaimed jewellers in India like Tata Group’s Tanishq, Kalyan Jewellers, and PC Jeweller are selling digital gold on their websites or sometimes through tie-ups with digital gold platforms.

3). Gold Exchange Traded Funds – ETFs

Like common stocks listed in BSC and NSC, you can also easily buy and sell gold on the stock exchange, and these funds have gold as their underlying asset. A few examples of gold ETFs in India are the UTI gold exchange-traded fund, Axis gold ETF, and Religare gold exchange-traded fund.

4). Gold Mutual Funds

Many broker houses allow investors to invest in gold ETFs at regular intervals. Like any other SIP program, you can finalise and specify the number of gold units you want to purchase at each transaction at regular intervals.

5). Buy Sovereign Gold Bonds (SBGs)

In 2015, the Government of India launched offering sovereign gold bonds via RBI. SBGs can be bought from nationalised, private & foreign banks, selected post offices and the Stock Holding Corporation of India Ltd. (SHCIL). These SGBs come with a price appreciation of 2.5% yield, and the yield is tax friendly.

Is Digital Gold a Better Investment Option?

The major difference between purchasing digital gold and physical gold is that with digital gold, you need not worry about the security and storage of the gold. You also need not pay rent or charges for safety lockers.

And if you are a regular purchaser of physical gold in the form of jewels, you know the purity of gold goes to 22K or lesser sometimes, and moreover, you need to pay making and wastage charges. But with digital gold, you need not have to worry about these issues. There neither won’t be heavy wastage and making charges nor tension on the purity of the gold.

Due to its convenience and flexibility, digital gold investment has become extremely popular in India. The introduction of digital gold investing apps has made it simple for investors to purchase and sell gold without worrying about storage or security concerns.

So definitely, digital gold is better than physical gold. Also, among the various types of digital gold mentioned above, you can try both digital gold and paper gold if you are trying to build a vibrant portfolio. But, compared to paper gold, digital gold, due to its redemption features, seems better for short-term and minimum investors.

Besides everything, digital gold is the easiest and best option for you if you are starting to set out your investment portfolio.  

Who Should Buy Digital Gold?

Anyone who is legally eligible to make financial transactions can start investing in digital gold. If you are a student and have savings from pocket money, you can invest in digital gold and let it appreciate. Also, people who cannot afford to buy the physical form of gold, as it requires lumpsum money, can buy digital gold.

People who are accumulating and saving money for buying physical gold in the future can invest that amount in digital gold whenever they have the extra money in their hands and convert them into physical gold whenever they want.

Digital Gold and Taxation in India:

It is important to understand the applicable taxability before you choose to invest. Indian taxation system treats digital gold ownership similarly to physical gold ownership. If you are holding digital gold under your ownership for less than 36 months, there won’t be any taxes directly levied. If the owner goes beyond 36 months, you would need to pay 20% tax on returns along with surcharges and cess. The holding period of your digital gold determined the taxes you must pay.

Debunking Digital Gold Misconceptions:

  1. Digital gold is paper certification of gold ownership – This is the most common myth you could hear about digital gold investments. This is not true. Every unit of digital gold you buy online is stored in a secured and insured vault associated with the seller. You can easily make it accessible by changing it into physical gold and getting it delivered to your house.
  2. It has a lengthy and extensive documentation process – Like any other online shopping experience, buying digital gold is also an easy and quick process. You need a phone, an active internet connection and a bank account or UPI to make a digital gold purchase. After thoroughly checking the portal, you have chosen to buy digital gold, you can make a payment and get ownership of the digital gold, similar to purchasing physical gold in shops.

Top Reasons Why You Should Consider Investing in Digital Gold:

1). Investment in Small Amounts

One doesn’t require a considerable amount to buy gold anymore. You can even start investing in digital gold with one rupee.

2). Buy or Sell Anytime and Anywhere

Digital gold can be bought or sold anywhere from India at any time. Whenever you have money to invest, you can easily invest, and when you require cash, you can sell the gold and liquidate it. There is no minimum holding period; with most providers, you don’t have to pay additional charges for buying or selling the gold digitally.

3). Secure Investment

Investing in digital gold is the best-secured investment option. Unlike any other mutual funds, there is no worry about value depreciation. The gold rate always appreciates and rises steadily. And also, unlike physical gold, you need not bear the burden of securing physical gold in your home or at the bank safely lockers. The digital gold providers will secure your gold in a government-authorized security vault and do not charge maintenance fees or rent for it as bank lockers do.

4). Genuineness

Sometimes, when we buy gold jewels, there is a chance to get tricked by the seller and purchase gold that is less than 22K, which downs the value of gold But with digital gold, it can never be an issue. They are pure 24K and come with 100% purity.

Risks Involved in Digital Gold Investments That You Should Know:

Like any other investment option, digital gold also has its demerits and risks. You need to know a few risks before investing in digital gold.

  • As mentioned earlier in the article, there is no proper regulatory board to monitor the digital gold sector in India.
  • Although digital gold providers don’t ask for additional charges for buying or selling gold, you can’t skip the GST. There is a 3% GST charge on buying and selling digital gold.
  • When you redeem your digital gold into physical form and want it delivered to your doorstep, the sellers may ask for making and delivery charges.

Final Words:

We live in the digital age, and people are now more aware of various and vivid investment options. They are also actively shifting from investing in physical assets to digital means.

Hope by now you would have understood why you should invest in digital gold, with deep insights into its advantages and risks. Despite risks, investing in digital gold in India is safe and secure. It offers flexibility, purity, and proper value for money.

Spare8 is the best app for investment that facilitates buying digital gold automatically along with your everyday online transactions. Whenever you spend money digitally via your cards, net banking or UPI, Spare8 will round off the amount to the nearest 10 Rupees, and the rounded-up change will be invested into 24k digital gold.

About Aditi Singh 356 Articles
Aditi Singh is an independent content creator and money finance advisor for 5 years. She is recently added with Investment Pedia. Internet users are always welcome to put comments on her contributions.

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