Gold ETF vs Digital Gold: Which Should You Buy?

SEBI put it plainly in a press release on 8 November 2025. Digital gold products “are neither notified as securities nor regulated as commodity derivatives” and “operate entirely outside the purview of SEBI”. No securities market investor protection applies to them.

Gold ETF vs digital gold, compared

Why is a gold ETF regulated and digital gold is not?

A gold ETF is a mutual fund scheme. The rules sit across the SEBI (Mutual Funds) Regulations, 1996. The scheme must hold gold and gold-related instruments. Custody must be with a bank. Valuation follows the Eighth Schedule, using the London Bullion Market Association AM fixing price for gold of 995.0 fineness, converted at the RBI or FEDAI reference rate. A 2021 SEBI circular adds a tracking error limit of 2% and a dedicated commodity fund manager.

Digital gold has no equivalent. It is a contract with a company that says it holds gold for you. In August 2021, NSE circular 73/2021 told brokers to stop offering it, quoting a SEBI letter of 3 August 2021. The ground was Rule 8(3)(f) of the Securities Contracts (Regulation) Rules, 1957, which bars brokers from non-securities business.

We checked whether any other Indian regulator covers it. We found no statement bringing digital gold under RBI, IRDAI or another authority. So the safe framing is this: SEBI says it is outside its remit, and we could not confirm anyone else has taken it on.

How is gold taxed in India now?

The law changed twice, so be careful with older articles. The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the 1961 Act. It also replaced “assessment year” with “tax year”.

Holding period is set by section 2(101). A security listed on a recognised Indian stock exchange is long term after 12 months. Everything else takes 24 months. Gold ETF units are listed, so the 12-month test applies to them. Physical and digital gold fall under the 24-month test.

The long-term rate is 12.5% under section 197(1)(b), without indexation. One point is widely got wrong. The ₹1,25,000 annual exemption in section 198 applies only to STT-paid equity shares, equity-oriented fund units and business trust units. A gold ETF is not equity-oriented, so that exemption does not apply to it.

Short-term gains on either are taxed at your slab rate. Check the current slabs before you assume a rate.

On GST we will not give you a number. Gold has long attracted 3% GST at purchase. We could not verify whether that rate survived the September 2025 GST rationalisation, so we are not printing it. Ask the seller to show the rate on the invoice.

What about sovereign gold bonds?

They were the best gold product India has had, and they are effectively unavailable. There has been no new tranche since the 2023-24 Series IV issue in February 2024. RBI’s page has carried only redemption notices since. The government has not published a formal discontinuation, so we describe it as no new issuance rather than as closed.

The tax treatment also narrowed. The Finance Act 2026 substituted section 70(1)(x) of the Income-tax Act, 2025. Redemption is not treated as a transfer only if the bond is held by an individual from the date of original issue until maturity. If you bought on the secondary market, or redeem early, the old blanket answer no longer holds.

What is the IBJA price and why is your quote different?

The India Bullion and Jewellers Association publishes a daily fix. On 27 August 2026 the AM fix for 999 purity was ₹1,58,477 per 10 grams, and for 22 carat ₹1,45,165. That basis is per 10 grams, excluding GST and making charges.

Your digital gold quote will differ from that fix. It carries the platform’s spread, its vaulting cost and its margin. None of those are published as a rate. That is the practical cost of the product, and it is the number you cannot see. Our gold rate page tracks the fix itself, and silver rates work the same way.

So when is digital gold defensible?

For very small amounts, over short periods, from a seller you would be willing to lend money to unsecured. That is what it is: an unsecured claim on a company.

If you want to buy in small amounts, a gold ETF or a gold fund of funds does the same job inside a regulated wrapper. You will need a demat account for the ETF. If your aim is to borrow against gold instead, see gold loans.