Every Dhanteras the same question comes up at the dinner table: should the family buy another chain, or is there a smarter way to invest in gold? The honest answer is that jewellery is only one of five routes, and it is usually the most expensive one if your aim is saving rather than wearing.
This guide walks through each option open to an Indian saver today: physical gold with a BIS hallmark, gold ETFs, gold mutual funds, Sovereign Gold Bonds and digital gold. For each one you will see what you actually own, what it costs to get in and out, and how the tax works under the new Income-tax Act, 2025. The numbers in the examples are illustrations, not forecasts.
Five ways to invest in gold at a glance
Before the detail, here is the short version. The big difference between the options is not the gold price, which is the same for all of them, but the costs, the safety of the holding and who regulates the product.
| Option | What you own | Who oversees it | Main costs |
|---|---|---|---|
| Jewellery, coins, bars | The metal itself | BIS hallmarking rules for purity | Making charges, 3% GST, storage, resale deductions |
| Gold ETF | Units of a mutual fund scheme listed on the exchange | SEBI | Expense ratio, brokerage, demat charges |
| Gold mutual fund (fund of funds) | Units of a scheme that buys gold ETFs | SEBI | Expense ratio, possible exit load |
| Sovereign Gold Bond | A government security denominated in grams of gold | Issued by RBI for the Government of India | No new issues since February 2024; brokerage if bought on exchange |
| Digital gold | A claim on gold held by a private seller | Not regulated by SEBI | Buy-sell spread, platform and storage charges |
Physical gold: jewellery, coins and bars
Physical gold is the form most families trust because you can hold it. The trade-off is cost. When you buy jewellery you pay for the gold, the jeweller’s making charges and GST. According to the CBIC’s FAQ on gems and jewellery, GST is payable at 3% of the total transaction value of jewellery, whether or not the making charge is shown separately.
Take an illustration. Say a necklace has gold worth ₹1,00,000 and the jeweller adds making charges of ₹10,000. GST at 3% on ₹1,10,000 comes to ₹3,300, so you pay ₹1,13,300. If you sell it back the next week, most jewellers will pay you only for the gold content, and sometimes less. That ₹13,300 gap is the price of wearing your savings.
Check the hallmark every time
Purity is the second risk. Hallmarked gold jewellery carries three marks: the BIS standard mark, the purity in carats and fineness, and a six-digit alphanumeric HUID code. BIS says mandatory hallmarking now covers 392 districts and the hallmarking scheme covers seven grades, from 24KS down to 9K. You can type the HUID into the “Verify HUID” feature of the BIS CARE app to see the jeweller’s registration and the purity recorded for that piece.
Coins and bars usually carry lower making charges than jewellery, which makes them a better fit if you insist on metal you can touch. Either way, budget for a locker or insurance, because theft is a real cost that paper gold does not carry.
Gold ETFs: gold in your demat account
A gold exchange traded fund is a mutual fund scheme whose units trade on the stock exchange like shares. SEBI lists gold ETFs offered by mutual funds among its regulated gold products, along with exchange traded commodity derivatives and Electronic Gold Receipts. Each unit tracks the price of a small quantity of gold, so the value of your holding moves with the domestic gold price.
To buy a gold ETF you need a demat account and a trading account. You pay brokerage on each trade and the scheme deducts an expense ratio from its assets every year. There are no making charges, no purity worries and no locker. The catch is that you buy and sell at the market price on the exchange, so check that the ETF you pick trades in reasonable volumes; a thinly traded unit can be hard to sell at a fair price.
Gold ETFs suit people who already invest in shares and want gold as a steady slice of their portfolio. Buying a fixed amount every month is easy to do through your broker.
Gold mutual funds: no demat account needed
If you do not have a demat account, a gold mutual fund does the job. Most of these are fund of funds schemes: you buy units from the fund house and the scheme in turn invests in a gold ETF. SEBI’s scheme categories describe a fund of funds as an open-ended scheme investing in the funds it names, so read the scheme document to see which ETF sits underneath.
The convenience has a price. Your return is reduced by the expenses of the fund of funds and of the ETF it holds, so compare the total expense ratio before you invest. Some schemes also charge an exit load if you redeem within a set period. On the plus side you can start a SIP with small monthly amounts. To see how a regular monthly amount could grow at an assumed rate, try the SIP calculator; for a one-time purchase, use the lumpsum calculator. Remember that gold has no guaranteed return, so any rate you enter is only an assumption.
Sovereign Gold Bonds: what happened to new issues
Sovereign Gold Bonds were for years the favourite way to invest in gold for long-term savers. They are government securities denominated in grams of gold, issued by RBI on behalf of the Government of India. Per RBI’s FAQ, they pay a fixed 2.50% a year on the initial investment, credited half-yearly, on top of any rise in the gold price. The tenor is eight years, with early redemption allowed after the fifth year on interest payment dates. On redemption you get the simple average of the closing price of 999 purity gold, published by the India Bullion and Jewellers Association, for the previous three business days.
Can you still buy them?
Not from the government at present. RBI’s Sovereign Gold Bond page lists the issue price of the 2023-24 Series IV in February 2024 as the most recent new issue; since then it has published only redemption notices for older series. Existing bonds continue to pay interest and are being redeemed as scheduled. If you hold bonds in demat form, they are tradable on stock exchanges, which is also the only way a new investor can buy them today, usually at a price that differs from the gold value.
The tax change for bond holders
The interest is taxable as your income, and RBI says no TDS is deducted, so you must report it yourself. The capital gain on redemption has long been tax-free for individuals. Budget 2026 narrowed this: from tax year 2026-27, the exemption applies only where you subscribed at the original issue and held the bond continuously until redemption on maturity. If you bought on the exchange, or you redeem early, expect your gain to be taxed like other gold investments.
Digital gold: why SEBI has warned buyers
Many payment apps and online platforms let you buy gold for as little as a few rupees. It feels like a gold ETF, but it is a very different product. On 8 November 2025 SEBI issued a caution saying such digital gold or e-gold products are neither notified as securities nor regulated as commodity derivatives, and operate entirely outside its purview. SEBI added that they may expose investors to counterparty and operational risks, and that none of the investor protection mechanisms of the securities market will be available for them.
In plain words, you are relying on the seller and its vault partner to hold the gold they say you own. If something goes wrong, there is no SEBI complaint route. Also look at the gap between the buying and selling price on the app; that spread is a cost you pay every time. If you want small-ticket gold with a regulator behind it, SEBI points to gold ETFs, Electronic Gold Receipts and exchange traded commodity derivatives.
How tax works on each way to invest in gold
The 2024 overhaul of capital gains tax, carried into the Income-tax Act, 2025, set two holding periods. The CBDT’s FAQ says listed securities become long-term after one year and all other assets, including gold, after two years. Long-term gains on these assets are taxed at 12.5% without indexation. Short-term gains on gold are added to your income and taxed at your slab rate. The ₹1.25 lakh yearly exemption applies only to listed equity shares, equity funds and business trust units, not to gold.
Gold ETFs and gold mutual funds also escaped an earlier trap. The 2024 Budget memorandum noted that the “specified mutual fund” rule, which taxes gains as short-term whatever the holding period, had caught gold ETFs and gold mutual funds. The definition now covers only funds with more than 65% in debt and money market instruments, or funds that put 65% or more into such funds.
| Option | Long-term after | Long-term gain | Short-term gain |
|---|---|---|---|
| Jewellery, coins, bars | 24 months | 12.5% | Slab rate |
| Gold ETF (listed units) | 12 months | 12.5% | Slab rate |
| Gold mutual fund (unlisted units) | 24 months | 12.5% | Slab rate |
| Sovereign Gold Bond | 12 months if sold on exchange | 12.5%; exempt only for original subscriber held to maturity | Slab rate; interest always taxable |
| Digital gold | 24 months (not a listed security) | 12.5% | Slab rate |
As an illustration, say you bought gold ETF units for ₹2,00,000 and sold them after 14 months for ₹2,40,000. The ₹40,000 gain is long-term, so the tax is ₹5,000 at 12.5%, plus cess. Sell the same units after ten months and the ₹40,000 is added to your income for the year instead. You can see the effect on your total bill with the income tax calculator.
Costs compared: choosing what fits you
There is no single best way to invest in gold. It depends on why you want it.
- For a wedding or a gift: buy hallmarked jewellery, check the HUID and keep the bill. Accept that making charges are a consumption cost.
- For long-term savings with a demat account: gold ETFs keep costs low and let you sell in small lots.
- For a monthly habit without demat: a gold fund of funds lets you run a SIP, at a slightly higher expense.
- If you already hold Sovereign Gold Bonds: think twice before selling early, because the tax-free treatment now needs you to hold until maturity.
- For digital gold: treat it as a convenience product outside SEBI’s protection, and keep amounts small if you use it at all.
Many planners suggest gold as a modest share of savings rather than the core, since it pays no rent or dividend (Sovereign Gold Bonds aside) and its price can fall for years. That share is a personal call; there is no official rule.
Key takeaways
- Jewellery carries making charges and 3% GST on the full value, so it is the costliest route for saving.
- Always check the BIS hallmark and verify the HUID on the BIS CARE app before you pay.
- Gold ETFs and gold mutual funds are SEBI-regulated; ETFs need a demat account, funds do not.
- No new Sovereign Gold Bonds have been issued since February 2024, and the tax exemption now needs the original bond held to maturity.
- SEBI says digital gold sits outside its regulation, with no investor protection from the securities market.
- Long-term gains on gold are taxed at 12.5%: after 12 months for listed ETFs, after 24 months for most other forms.
This guide is general information, not personal advice. Rules and prices change, so check the latest position with RBI, SEBI and the Income Tax Department before you act.
