What is Digital Gold?

Gold has always been one of the most trusted investment options in India. Traditionally, families purchased physical gold in the form of jewelry, coins, or bars. But in today’s digital era, a new way of investing has gained popularity: digital gold investment in India. This modern option allows you to buy and store gold online without worrying about security, storage, or making large upfront payments.

In this blog, we will explain how digital gold works, its benefits and disadvantages, the different ways to invest, and how it compares with physical gold.

How digital gold works

Digital gold is a form of investment where you buy gold online through mobile apps, payment wallets, or websites. Instead of physically storing the gold, the company keeps an equivalent amount of gold in insured vaults on your behalf.

Key points about how it works

• You can start investing with very small amounts, even as low as one rupee.

• When you purchase, the provider buys physical 24K gold of equivalent value and stores it safely.

• The value of your digital gold increases or decreases based on the live gold market rates.

• At any time, you can choose to sell the digital gold back online for cash or convert it into physical gold coins or bars delivered to your doorstep.

Benefits of investing in digital gold

Easy to buy and sell

You can purchase digital gold instantly using mobile apps or digital wallets without visiting a jeweler.

Safe and secure storage

The gold you buy is stored in insured vaults by trusted providers, so you do not need to worry about theft or storage costs.

Affordable investment

Unlike physical gold jewelry that requires a larger sum, digital gold investment in India allows you to start with as little as one rupee.

High purity

Most digital gold providers offer 24K pure gold with 99.9 percent purity, ensuring you get the best value.

Liquidity

You can sell your digital gold anytime online and get the value credited directly to your bank account at current market rates.

Disadvantages of digital gold

Lack of physical possession

You do not hold the gold physically unless you choose to convert it into coins or bars later.

Storage and platform charges

While storage is usually free for the first few years, charges may apply later. Some platforms may also add GST or transaction fees.

No regulatory framework

Currently, digital gold investment in India is not regulated by a central authority like SEBI or RBI. This can pose risks if the platform is unreliable.

Limit on investment

Many platforms have a maximum investment limit (for example, up to 2 lakh rupees), which may not suit investors wanting to buy in larger quantities.

Different Ways of Investing in Digital Gold

Digital gold platforms

Several trusted fintech and precious metals companies allow you to buy, sell, and hold digital gold with small amounts. Purchases are backed by physical 24-carat gold stored in insured vaults. Some providers also allow redemption in coins or bars, subject to minimum order limits and purity standards.

Mobile apps and digital wallets

Apps like PhonePe, Paytm, and Google Pay have partnered with digital gold providers to make investing easy. You can buy fractional gold, see live rates, and track your holdings in real time. Some apps may apply small transaction fees, and redemption rules differ by provider.

Sovereign Gold Bonds and Gold ETFs

Sovereign Gold Bonds (SGBs) are government-backed schemes issued by the Reserve Bank of India. They pay fixed interest in addition to tracking gold prices and are held in paper or demat form. Gold ETFs, on the other hand, are traded on stock exchanges and provide exposure to gold price movements without requiring you to hold physical gold.

Also Read: Gold ETF vs SGB

Jeweller digital gold and saving schemes

Well known jewellers such as Tanishq, Kalyan Jewellers, and Malabar Gold offer digital gold and saving schemes. In these plans, you can invest a fixed sum each month and later redeem it for jewellery, coins, or bars. Terms on purity, making charges, and redemption flexibility vary by jeweller, so it is important to review conditions carefully before enrolling.

Digital Gold vs Physical Gold

Also Read: Gold ETF vs Physical Gold

Taxation on Digital Gold and Physical Gold

Taxation on digital gold

When you sell digital gold, the gains are treated like physical gold for tax purposes since it is classified as a capital asset. If you sell within three years, the profit is considered short term capital gain and taxed as per your income tax slab. If you hold for more than three years, it is treated as long term capital gain with 20 percent tax after indexation. Additionally, GST is charged at the time of purchase on the value of gold.

Taxation on physical gold

Physical gold such as jewellery, coins, or bars follows the same taxation rules as digital gold. Short term gains (sold within three years) are taxed as per your income slab, and long term gains (sold after three years) attract 20 percent tax with indexation benefit. You also pay GST at the time of purchase, along with making charges in case of jewellery. Moreover, if you make large cash purchases of physical gold above the prescribed limit, PAN card details are mandatory, and it may attract scrutiny under income tax regulations.

Conclusion

Digital gold has emerged as a convenient and accessible way to invest in 24K gold without worrying about storage or safety. While it offers flexibility, liquidity, and ease of use, investors must also be mindful of charges, limits, and the lack of direct regulation. For those seeking a balanced approach, digital gold can complement traditional options like physical gold, Sovereign Gold Bonds, or FDs, depending on your financial goals.

FAQs:

Is it safe to buy digital gold?

Yes, buying digital gold is generally safe when done through trusted platforms, as your purchase is backed by 24K physical gold stored in insured vaults. However, since it is not yet regulated by RBI or SEBI, you should choose reputed providers and review storage, charges, and redemption terms carefully.

Can we convert digital gold to cash?

Yes, you can convert digital gold to cash by selling it back through the platform or app where you purchased it. The amount is credited to your bank account at the prevailing market rate, after applicable charges.

Is digital gold approved by the RBI?

No, digital gold is not directly regulated or approved by the RBI. It is offered by private providers in partnership with refineries and vault services. While your purchase is backed by physical gold, it does not fall under RBI or SEBI regulation, so you should only buy from reputed and trusted platforms.

Is digital gold better than FD?

Digital gold and fixed deposits serve different purposes. Digital gold tracks gold prices and can give higher returns if prices rise but carries price risk and no guaranteed income. Fixed deposits (FDs) offer assured returns with low risk but usually lower growth.

How to earn profit from digital gold?

You earn profit from digital gold by selling it at a higher price than you bought it. You can sell any portion of your holdings, review the live price, confirm the sale, and the profit gets credited directly to your bank account or wallet.