Digital Gold vs. Gold ETFs vs. Physical Gold: Which Is the Better Gold Investment in 2025?
Last published/edited on 2025-05-06
Gold continues to be a trusted form of investment across Indian households. In 2025, investors have more than one way to gain exposure to this precious metal. The three major avenues of gold investmentavailable today are Digital Gold, Gold Exchange-Traded Funds (ETFs), and Physical Gold. Each comes with distinct costs, tax rules, and levels of liquidity. This updated guide compares all three so you can make an informed decision.
Digital Gold
Digital Gold allows fractional ownership of pure gold online through apps like PhonePe, MMTC-PAMP, Augmont, and SafeGold. Starting at just ₹1, investors can buy and store gold digitally, which is fully backed by physical reserves in secure vaults. This form of gold investment is gaining popularity through the daily use apps like Phonepe, Groww, paytm etc.,
Costs
- 3% GST charged upfront on each transaction.
- No annual management fees, but a few platforms levy a small custody fee (~0.3% per annum) after 5 years.
- When you want to redeem your value accumulated as physical form, it incurs minting or delivery charges, typically ranging between 8–10%.
- Buy/sell price spreads exist as with any trading platform(Buying pricle slightly higher than the selling price for any specific day).
Liquidity
- You can buy or sell gold instantly through supported apps.
- No Demat account is required.
- Funds are credited quickly after the sale.
Regulation
- Digital gold investment is currently not regulated by SEBI or RBI.
- SEBI banned stockbrokers from offering digital gold investments in 2021.
- Ensure you invest via credible, audited providers.
Taxation
- Long-term capital gains (>2 years) are taxed at 12.5% without indexation.
- Short-term gains are taxed as per the income slab.
- GST paid during purchase is not refundable.
Gold ETFs
Gold ETFs are mutual fund units that represent 99.5% pure gold and trade on stock exchanges such as NSE and BSE. A Demat account is necessary to invest if you choose Gold ETf as a form of gold investment. There are many old ETFs listed on NSE like Axis Gold ETF, Birla Sun Life Gold ETF, Canara Robeco Gold ETF etc. You can see the NSE listed ETFs here
costs
- Expense ratios vary from 0.3% to 0.6% annually.
- No GST is applicable.
- Brokerage fees apply during buy/sell.
Liquidity
- Traded throughout market hours with transparent pricing.
- Liquidity varies based on ETF scheme.
- Much lower in expenses than physical gold.
Regulation
- Gold ETFs are regulated by SEBI.
- These funds must hold physical gold to match the units issued.
Taxation
- LTCG (>12 months) are taxed at 12.5% with indexation benefit(adjusted purchase price for inflation).
- Short-term gains are taxed as per the applicable income tax slab.
- Pre-April 2025 units may follow transitional tax rules.
Physical Gold
This includes gold jewellery, coins, and bars purchased from banks or jewellers. Although the oldest method of gold investment, it often comes with hidden charges.
Costs
- Making charges range from 8–25%, depending on design and source.
- 3% GST applies on top of the gold price.
- Storage (lockers/insurance) is an additional cost.
Liquidity
- Slower compared to digital methods.
- Resale usually involves valuation decrease.
- Selling may require in-person visits to buyers or jewellers.
Regulation
- Physical gold is unregulated.
- BIS hallmarking ensures some level of purity assurance.
Taxation
- Same rules as digital gold.
- When you sell, 20% tax and a 4% cess on LTCG(> 3 years of purchase).
- STCG (< 3years of purchase>)taxed per income slab.
Returns and expenses summary
| Investment Type | Price Linkage | Key costs | Liquuidity |
|---|---|---|---|
| Digital Gold | International Gold Rates | 3% GST(3% if you buy and 3% if you sell) + ~0.3% custody (after 5 yrs) | Very High |
| Gold ETFs | Domestic Market Rates (NSE/BSE) | 0.3%–0.6% AMC + brokerage | High |
| Physical Gold | Local Retail Market | 8%–25% making + 3% GST | Medium |
Taxation summary
| Assset Type | LTCG Threshold | LTCG Rate | STCG rate |
|---|---|---|---|
| Digital Gold | > 2years | 12.5% without indexation | income slab-based |
| Gold ETFs | > 1year | 12.5% without indexation | income slab based |
| Physical Gold | > 2years | 12.5% without indexation | income slab based |
what about Soverign Gold Bonds(SGBs)?
SGBs were previously considered one of the best options for gold investment, offering 2.5% interest per annum and tax-free capital gains on maturity. However, the Government of India discontinued fresh issuances of SGBs after February 2024 due to rising fiscal pressure. Existing SGB holders can still sell on exchanges or redeem at maturity.
| Investor Type | Option to consider |
|---|---|
| First time Investors | Digital Gold |
| Working Professionals | Gold ETFs |
| Retirees | Physical Gold/Gold ETFs |
| For Gifting | Digital Gold/coins |
If you're looking for ease and flexibility, digital gold is a great entry point for gold investment. For regulatory safety and long-term cost-efficiency, gold ETFs shine. Physical gold remains ideal for those who value ownership and cultural traditions. Most financial experts recommend allocating 5–10% of your total investment portfolio to gold, ideally balancing between digital, ETFs, and a small portion of physical assets. Let your gold not just rest in your locker, but work in your portfolio too!
