Digital gold: It is a tradition in India to buy gold during festivals. Traditionally people have been buying physical gold. However, apart from physical gold, the option of digital gold is also with investors, whose attraction is increasing. This is done through various investment platforms that buy and hold gold in the name of investors. These investment platforms keep the gold purchased by the customer in vaults/lockers which are audited and insured.
According to Ashraf Rizvi, Founder and CEO, Gilded, digital gold differs from gold ETFs or SGBs (Sovereign Gold Bonds) in the way that ETFs and SGBs track the price of gold and do not hold physical gold. In contrast, in digital gold, physical gold is also held in the name of the investor. There are a few things you need to know before investing in digital gold.
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Gets gold directly from miners
According to Rizvi, when you buy physical gold, it cannot be trusted whether the gold is found pure or not. Apart from this, jewelry is not made from 24 carat i.e. pure gold. On the other hand digital gold is completely 24 carat gold and it is obtained from miners like government company MMTC PAMP or Augment Gold.
You can buy digital gold even for just Rs 100
Investing in digital gold does not require a huge amount of money, but by adding some money like at least Rs 100 every week or month, you can buy a good amount of gold after a time.
Charges and Tax Liability
- The investment platform holds the digital gold on the investor’s side for at least 5 years at no extra cost. Whether its purchase and sale in the country or abroad, GST is not to be paid on it. Conversely, when physical gold is sold in the market, making charges and other additional taxes have to be paid, which affects the returns of investors.
- Long-term capital gains on sale after holding digital gold for three years are subject to tax (surcharge and cess extra) at the rate of 20 per cent. However, according to Rizvi, it can reduce the tax liability as it gets the benefit of indexation.
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- If you sell digital gold after holding it for less than three years, then the individual has to pay tax as per the slab rate.
- Digital Gold can be gifted to a close relative without any tax liability. However, no person other than a close relative has to pay tax on digital gold up to Rs 50,000, neither to the beneficiary nor to the giver.
where to buy
Digital gold can be bought through various online platforms like Gilded, Paytm. According to Rizvi, market regulator SEBI has barred registered brokers from selling digital gold.
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Convenience and Liquidity
Digital gold is safer and more liquid as the gold is directly owned by the investor. According to Rizvi, whether the investment platform ceases to exist or dies, the investors will continue to own the gold and can hold it and sell it whenever they want at the market price on any given day.
investment return
Gold remains a better and safer investment option in the long term. Investors have got 15 per cent returns on gold in the last five years. Last year itself, it gave a return of more than 40 per cent. According to Rizvi, the returns from gold are usually opposite to the market rally, that is, if there is a fall or uncertainty in the market, then the returns from gold will be higher. According to experts, investors should keep 10-15 per cent of their portfolio in gold to tide over the tough times.
(Article: Priyadarshini Maji)
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