Have you ever noticed how gold quietly finds its way into every Indian household? From weddings to festivals, it holds emotional and financial value. But times have changed. Today, you do not need to store jewellery in a locker to benefit from rising gold prices.
- What is a Gold ETF in India?
- Features and Benefits of Gold ETFs
- How Does a Gold ETF in India Work?
- Example
- Gold ETF Taxation in India
- How to Invest in Gold ETF on Paytm Money
- Digital Gold vs Gold ETF in India
- Risk Factors of Gold ETF in India
- Things to Consider Before Investing
- Who Should Invest in Gold ETF in India?
- Conclusion
- FAQs
If you are looking for a smarter, safer and more convenient way to invest in gold, a Gold ETF in India could be the right choice. It gives you exposure to gold without worrying about purity, storage or making charges.
In this detailed guide, we will explain the Gold ETF in India, how it works, taxation rules, benefits, risks and how you can invest step by step. Everything is simplified for easy understanding.
What is a Gold ETF in India?
A Gold ETF in India is a commodity based exchange traded fund that invests in physical gold. Each unit of a Gold ETF typically represents 1 gram of gold. These units are traded on stock exchanges just like shares.
Instead of buying physical gold, you buy ETF units through your Demat account. The fund house purchases physical gold and stores it securely in vaults. Your investment reflects the market price of gold.
In simple words, a Gold ETF allows you to own gold in electronic form.
(Source: HDFC Mutual Fund)
Features and Benefits of Gold ETFs
Investing in a Gold ETF in India offers a blend of traditional safety and modern convenience. Here is why they are becoming a staple in Indian portfolios:
- Purity and Safety: Since these are regulated by SEBI, you do not need to worry about the “karat” of your gold. The underlying gold is of high purity and is stored in secure, insured vaults by the Asset Management Company (AMC).
- High Liquidity: Unlike physical gold, which you might have to take to a jeweller for valuation, you can sell your Gold ETF in India units instantly on the stock exchange during market hours at transparent prices.
- Lower Entry Cost: You do not need thousands of rupees to start. You can buy as little as one unit (1 gram), making it accessible for everyone.
- No Making Charges: When you buy jewellery, you pay 10% to 20% extra as making charges. With a Gold ETF in India, you pay the actual market price plus a tiny brokerage fee. Brokerage varies by broker. Many discount brokers charge much lower (even ₹0 for delivery)
- Collateral Potential: These digital units can be pledged as security to obtain loans from various financial institutions.
(Source: HDFC Mutual Fund)
How Does a Gold ETF in India Work?
Understanding how a Gold ETF in India works is simple.
- The Asset Management Company purchases physical gold.
- The gold is stored securely in vaults.
- Investors buy ETF units through stock exchanges.
- The Net Asset Value moves in line with gold prices.
- Investors can sell units anytime during market hours.
Example
Suppose you invest ₹15,000 in a Gold ETF.
- If 1 unit costs ₹5,000, you can buy 3 units.
- If gold prices rise to ₹5,500 per unit, your 3 units become worth ₹16,500.
- If gold prices fall, your investment value decreases accordingly.
(Source: Clear Tax)
Gold ETF Taxation in India
Gold ETFs are not treated as equity funds. They are taxed like physical gold.
Here is a simple tax structure:
| Holding Period | Type of Gain | Tax Rate |
|---|---|---|
| Less than 12 months | Short Term Capital Gain (STCG) | 20 percent |
| More than 12 months | Long Term Capital Gain (LTCG) | 12.5 percent without indexation |
Important numbers to remember:
- Long term period: 12 months
- LTCG tax: 12.5 percent
- STCG tax: 20 percent
Capital gains tax applies whenever you sell the units at a profit.
(Source: The Economic Times)
How to Invest in Gold ETF on Paytm Money
Follow these simple steps:
Step 1: Open the Paytm Money App
Log in to your Paytm Money application using your registered mobile number and password.
Step 2: Go to the ETF Section
On the home screen, locate the ETF section. You will find it at the top right, next to the Mutual Funds tab.
Step 3: Explore Available ETFs
Once you enter the ETF section, you will see categories such as:
- Popular
- All
- Equity
- Gold
- Debt
- Global
These filters help you quickly find the type of ETF you are looking for.
Step 4: Select the Gold Category
Click on the Gold tab to view all available Gold ETFs. Compare different ETFs based on factors like price, past performance, expense ratio and liquidity before making your decision.
Step 5: Place Your Order
After selecting your preferred Gold ETF, click on Buy.
You can choose between:
- Delivery, if you want to hold it in your Demat account
- Intraday, if you plan to trade within the same day
You also have the option to start an SIP in Gold ETF for systematic investing instead of investing a lump sum amount. Track gold prices and review periodically.
Digital Gold vs Gold ETF in India
Many investors confuse digital gold with Gold ETFs. Here is a clear comparison:
| Feature | Digital Gold | Gold ETF (India) |
|---|---|---|
| Ownership | Direct ownership of physical gold held in a vault | Ownership of fund units representing physical gold |
| Mode of Purchase | Fintech Apps or websites (Directly from provider) | Stock exchange via Demat & Trading account |
| Minimum Investment | Starts from as low as ₹1 | Price of 1 unit (Approx. 0.01g to 1g equivalent) |
| Regulation | Unregulated (SEBI cautioned in Nov 2025) | Strictly regulated by SEBI |
| Liquidity | High; Sell anytime 24/7 on the platform | High; Traded during stock market hours |
| Delivery Option | Physical delivery available (Coins/Bars) | No physical delivery (Cash redemption only) |
| Taxation (LTCG) | 12.5% after 24 months holding | 12.5% after 12 months holding |
| Storage | Vault storage by provider (First 2-5 years often free) | No storage concern; held digitally in Demat |
Gold ETFs are regulated by SEBI, which provides higher transparency and security.
(Source: MMTC Pamp)
Risk Factors of Gold ETF in India
While Gold ETFs are safe in terms of storage, they still carry market risks.
- Gold prices can fluctuate.
- Returns depend on global gold demand and supply.
- Expense ratios reduce overall returns.
- Tracking error may slightly impact performance.
Things to Consider Before Investing
Before you invest in a Gold ETF in India, keep these points in mind:
- Limit gold exposure to 5 percent to 10 percent of your portfolio.
- Gold works well as a hedge against inflation.
- Review tracking error before selecting a fund.
- Compare expense ratios.
- Monitor global gold trends.
- Consider your investment horizon.
Gold is better suited for diversification rather than aggressive wealth creation.
(Source: Clear Tax)
Who Should Invest in Gold ETF in India?
A Gold ETF in India is suitable for:
- Investors seeking portfolio diversification
- Those who want gold exposure without storage hassle
- Investors who prefer regulated products
- Individuals with short to medium term horizon
It may not suit investors looking for very high growth like equity funds.
Conclusion
As investing becomes increasingly digital, Gold ETFs provide a modern, convenient and transparent way to participate in gold price movements without worrying about storage or purity. Each unit represents approximately 1 gram of gold and is traded on stock exchanges, offering liquidity and cost efficiency.
Taxation is straightforward, with 12.5 percent long term capital gains tax after 12 months and 20 percent short term tax before that. Regulated by SEBI, Gold ETFs can form 5 percent to 10 percent of a diversified portfolio.
Disclaimer: Mutual fund investments are subject to market risks. Please read all scheme related documents carefully before investing. This content is purely for information purpose only and in no way is to be considered as an advice or recommendation. The securities are quoted as an example and not as a recommendation. Investors are requested to do their own due diligence before investing.
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FAQs
What is the difference between a Gold Fund and a Gold ETF?
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A Gold ETF directly invests in physical gold and is traded on stock exchanges like shares. To invest in a Gold ETF, you need a Demat and trading account.
A Gold Fund is a mutual fund that invests in Gold ETFs instead of holding gold directly. You can invest in a Gold Fund without a Demat account, but the expense ratio is usually slightly higher due to the additional layer of management.
What is the difference between Gold ETF and Gold BeES?
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Gold BeES is simply one specific Gold ETF offered by Nippon India. It is among the earliest and most actively traded gold ETFs in India.
However, Gold BeES is not a separate investment category. It is one of several Gold ETFs available in the market, as many other asset management companies also offer similar products.
How is Gold ETF different from Physical Gold?
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Gold ETFs give you exposure to gold in digital form. They remove concerns related to storage, theft, and purity. They also do not involve making charges, and transaction costs are generally lower.
Physical gold, such as jewellery or coins, carries emotional and cultural value. However, it involves additional costs like making charges, storage expenses, and potential resale deductions.
