Akshaya Tritiya is an auspicious festival in India that is celebrated by buying physical gold as it symbolises prosperity and wealth. With an increase in the adoption of digital gold, you may be confused between physical and digital ones. In this article, let’s discuss the difference between digital and physical gold and help you decide which one to buy this Akshaya Tritiya.
What does investing in physical gold mean?
Are you a hands-on investor who loves the feeling of physical assets? With gold coins and jewellery, you can hold your investment in your hand and feel the weight of your wealth and this is how investing in physical gold looks like. However, you need to have a knowledge of the purity of gold otherwise always buy from the purity marked gold to make it a worthy investment.
What does investing in digital gold mean?
Digital gold is a paperless form of gold that you can buy and sell through a mobile app or website. It's backed by physical gold stored in secure vaults with the same level of purity as physical gold, and you can buy and sell it in small quantities.
Physical gold vs Digital gold
| Parameters | Physical Gold | Digital Gold |
| Price | Physical gold prices are not uniform and may vary based on factors such as demand and supply, purity, and making charges. | Digital gold prices are uniform across the country and are based on the prevailing market rates of gold. |
| Investment | Investing in physical gold requires a significant corpus to start investing. | Digital gold can be bought in small quantities starting from as low as ₹100, making it accessible to all investors. |
| Cost | Buying gold jewellery involves paying 20% – 30% of the gold's total value as making charges, which adds to the investment cost. | 3% GST is charged on digital gold purchases, which is relatively lower than the making charges for physical gold. |
| Taxation | Gains from a physical gold investment held for less than three years are taxable per the investor's income tax slab rates. The gains are taxable at 20% with an indexation benefit for an investment withholding period of more than three years. | Gains from a physical gold investment held for less than three years are taxable per the investor's income tax slab rates. The gains are taxable at 20% with an indexation benefit for an investment withholding period of more than three years. |
| Liquidity | Physical gold can be easily bought from any bank or jeweller. Still, it may only be exchanged through a jeweller, making it less liquid. | Digital gold can be easily redeemed as coins and bullion or cashed out, making it highly liquid and convenient for investors. |
Investing in physical or digital gold ultimately depends on the individual's investment objectives, risk appetite, and personal preferences. Both investment options have their own advantages and disadvantages, and it is essential to weigh them before deciding. Regardless of choice, investing in gold could be an option to diversify your portfolio as during adverse market trends and economic situations, gold provides you with stable returns than other forms of investments.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com
Disclaimer: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment-related decision.
