Summary of this article
Digital gold offers convenience, safety, and flexibility, making it ideal for small or systematic investments, though platform and GST costs can narrow the price gap with physical gold.
However, digital gold is largely unregulated by any authority (like RBI or Sebi), which is a concern for many investors.
Physical gold retains emotional and traditional appeal but carries higher costs through making charges, purity checks, and storage expenses.
For long-term investors, SGBs have provided the most tax-efficient returns, while currently Gold ETFs offer regulated, liquid exposure without physical storage.
Gold and festivals go hand in hand in India. The occasion of Dhanteras, in particular, sees a spike in gold buying, jewellery, coins, and bars as people combine religious sentiment with investment motives. But this year, more investors could be wondering whether digital gold might offer a smarter path as compared to traditional purchases of physical gold.
Says Prithviraj Kothari, Managing Director at RiddiSiddhi Bullions Ltd., President of India Bullion and Jewellers Association Ltd. and Chairman at Jain International Trade Organisation, "Ahead of Diwali and Dhanteras, investor sentiment remains bullish, with expectations that U.S. rate cuts, a softer dollar, and persistent geopolitical tensions will continue to support gold."
He adds, "In India, festive and wedding demand will add a seasonal push, though high prices may prompt lighter purchases or a shift toward digital and ETF formats. Overall, gold's outlook remains firmly positive, with dips likely to be viewed as fresh buying opportunities amid global economic fragility."
With sentiments, investments, and festivities involved, it is worth evaluating which kind of gold purchase is better suitable for buyers. Let's understand the pros and cons of both to help you make a decision.
The case for digital gold
Digital gold lets you buy just Rs 10 or higher, a form of fractional investment that physical gold can't match. You skip making charges, and the gold is held in insured vaults, easing worries about theft or locker costs. You can buy or sell 24×7 using trusted apps, giving liquidity that physical gold finds hard to match.
That said, digital gold is not entirely 'fee-free'. There is a 3 per cent GST on purchase. After a few years, custodial charges (say around 0.3 to 0.4 per cent annually in many platforms) may kick in. Some platforms may impose conversion or delivery costs if you redeem into physical coins or bars. Hidden spreads on the buy–sell price also eat into returns.
However, it is important to note that digital gold is not directly regulated by any single authority like the Reserve Bank of India (RBI) or Securities and Exchange Board of India (Sebi). Currently, it operates in a legal grey area governed by the terms and conditions of the service provider.
Many investors worry about the trustworthiness of the platforms and whether they are adhering to regulatory norms set by concerned authorities.
Therefore, it is important for buyers to carefully evaluate the platform they are choosing.
What physical gold still gives you
Physical gold has always had a tangible appeal. Jewellery provides aesthetic value and holds cultural significance during festivals and weddings.
There is a sense of ownership and satisfaction that digital gold cannot replicate.
However, these benefits come at a price, such as making charges, purity concerns, and storage or insurance costs. Also, when you want to sell, jewellers will discount the value for purity checks, designs, and resale margins.
These charges could eat into your buying budget unless you're dealing in large, pure coins or bars.
If your investment or purchase is substantial, say Rs 2-3 lakh or more, physical gold (bars, coins, or jewelry) may begin to cost less in relative terms than digital gold platforms charging per-gram custody and spread fees.
The break-even point depends on how long you intend to hold, how efficient the digital platform is, and what your ultimate goal is.
Taxation on Gold
Tax treatment is broadly similar for physical and digital gold when you sell, but recent tweaks in law have changed timelines and rates:
Profits from sales held short-term (less than a defined threshold - less than 24 months) are taxed according to your income slab. Gains held longer (more than 24 months) qualify for a flat 12.50 per cent rate (without indexation) if sold after the cutoff period (which for some gold investments is now 12 months) under new rules.
Moreover, physical jewellery attracts making charges subject to 5 per cent GST and 3 per cent GST on the gold itself, and these costs cannot be reclaimed.
Gold ETFs now have shorter holding periods: if held more than 12 months, gains are taxed at 12.50 per cent without indexation.
Sovereign Gold Bonds (SGBs) deserve a separate mention. While you can't directly subscribe to fresh tranches this year, existing SGBs offer one significant advantage: if held to maturity (typically 8 years), capital gains are fully exempt from tax. Semi-annual interest (around 2.5 per cent) is taxed as per your slab, though. Moreover, tax deducted at source (TDS) is not deducted by the issuer on SGBs.
If you sell SGBs prematurely on the exchange, gains are taxed like other gold instruments, adjusted for holding period rules.
What might make sense this Dhanteras 2025
For small ticket investments or first-time buyers, digital gold offers a low-friction, flexible option. You can begin with minimal capital, build gradually, and enjoy easy liquidity and safer storage. However, do note that there's a regulatory grey area when it comes to institutional regulation of digital gold assets unlike other forms of platform-based investments (ETFs, mutual funds, etc.).
For gifts and jewellery needs, physical gold still carries an emotional value that no alternative can replace. For larger investments held over many years, bars or coins may outperform digital once you absorb upfront costs and avoid recurring platform fees.
For long-term tax efficiency, SGBs (if available to you) stand out because of the exemption on gains at maturity.
Diversified approach: The best way to make a choice is to understand it doesn't have to be an "either-or" decision when it comes to gold buying. One could always go for a mix of investments and see if accumulating digital gold gradually works in favour or buying physical gold is better.
The latter can be used for gifting purposes as well. SGBs are good for long-term tax-free growth for those who have those in their portfolio.
The key is to understand the individual needs and goals behind gold purchase.
In the backdrop of volatile global conditions and seasonal demand, the price of gold remains buoyant. Choosing how to own it responsibly may matter more than simply choosing to own it.
