Lesson 3 of 3 · 7 min
ETFs, digital gold, and who owes you
Four ways to own gold, one question that separates them: if the thing on the other side of your holding disappeared tomorrow, what would you be left with?
A gold ETF is a fund whose units trade on an exchange like a share, with physical gold held by a custodian behind them. You need a demat account. An ongoing expense is charged inside the fund — no making charge, no locker, no purity to assess. SEBI regulates the fund and its disclosures.
Digital gold is a different animal wearing similar clothes. An app sells you grams, says metal is stored on your behalf, and quotes a buy price and a sell price with a gap between them. That gap is a cost, and it is often larger than it looks.
The important part is who is on the other side: a private company, under a contract with you. It is not a SEBI-regulated scheme, and the protections that come with one are not there.
| Form | What you actually hold | Who owes you | The main cost |
|---|---|---|---|
| Jewellery | The metal, inside an object | Nobody — it is in your hand | Making charges, wastage and GST, none of which come back |
| Coins and bars | The metal | Nobody | A mark-up when buying, locker rent, and the discount on selling back |
| Sovereign Gold Bond | A claim on the Government of India, measured in grams | The Government of India | None to hold — but the government no longer sells new ones |
| Gold ETF | Units in a SEBI-regulated fund, backed by gold with a custodian | The fund | An ongoing expense inside the fund, plus demat and trading costs |
Tax on gold you sell
- Holding period for long-term treatment on physical gold
- 24 months
- Long-term rate on physical gold
- 12.5%
- Gold ETF units
- Check the current rule
Sell sooner and the gain is short-term, taxed at your own slab rate.
Without indexation, following the change with effect from 23 July 2024.
Units are taxed under the rules for units, which the Finance (No. 2) Act 2024 changed. Confirm the holding period on incometax.gov.in before planning around it.
It is gold either way, no?
KabirTara
Kabirasking
My aunt has bangles in a locker. My friend has grams in an app. Both of them say they own gold. Is there really a difference, or is that just people being fussy about words?
Taraexplaining
Ask what happens if the other side vanishes overnight. Your aunt still has bangles. Your friend has a claim on a company that no longer exists.
Kabirasking
So the app version is worse?
Taraexplaining
Not worse — different. The bangles cost making charges and GST that never come back, and they can be stolen. The app costs nothing to store and depends entirely on somebody else keeping their word.
Kabirasking
Then how do I even compare them?
Taraexplaining
One question, asked out loud: who owes me this, and what happens to me if they cannot pay? A coin says nobody. A bond says the government. An app says a company. Same metal, three completely different sentences.
Match them up
Five words worth carrying out of this course
Pick a term, then pick what it actually means.
Pick a term on the left.
Just for you
Think of the gold in your own family. How much of what was paid for it was metal, and how much was making, wastage and tax? Nobody has to answer out loud — but almost nobody has ever asked.
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Check yourself
1 / 3
Kabir asks
What does a gold ETF unit represent?
Done reading?
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