No matter whatever the returns, we Indians love to invest in Gold. Considering this, let us explore which are the best gold investment options in India in 2023.
According to the World Gold Council’s latest data in 2022, the demand for gold jewellery in India is the highest in the world (600.6 tonnes). This is almost around 30% of the total world demand for jewellery. Jewellery form of gold demand is almost more than 50% of the total gold demand. Just imagine how much we love gold.
However, before proceeding to read more about the best gold investment options in India, I suggest you read few articles I have written in this regard. This will bring you clarity on whether you should go ahead to invest in gold or not.
- List Of Sovereign Gold Bonds In India 2015 – 2023
- Can We Beat Inflation By Investing In Gold?
- Nifty 50 Vs Gold – Which Is The Best Investment?
- Yield To Maturity Of Sovereign Gold Bond – Misguiding Concept!!
- Sovereign Gold Bond Returns – How Much Can You Expect?
- Gold Volatility – Based On 43 Years Of History
- Taxation Of Sovereign Gold Bond 2023
- Gold Price Of Rs.18.75 In 1925 To Rs.47000 In 2020 – Should You Invest?
Best Gold Investment Options in India 2023
In this post, I am trying to list all the options available currently in India. Choosing the best gold investment options in India is best left to you based on your suitability.
# Physical Gold Jewellery
It is one of the oldest formats of gold investment for all of us. Few points to look for are as below.
- If you are planning to buy jewellery, then you have to bear a high cost in terms of wastage, making charges, and GST (3%).
- Selling is also not an easy task. Usually, jewellery shops have different (lower) buying prices than the selling price. Along with this, they usually deduct the wastage also.
- The purity of gold jewellery is always less than 24 carats and a concerning point.
- Even though most jewellers are ready to exchange the gold sold by them at the market rate, very few will come forward to pay in cash. Most of them deduct 5-10% of the value if you want hard cash. The deduction is higher if you try to sell gold that has been bought from some other jeweller. This is because buyers may doubt the gold’s purity, claiming it to be suspect, and pay you less.
- If you are selling the gold within three years, then the gain is considered a short-term capital gain and taxed as per your tax slab.
- If you are selling the gold after three years, then the gain is considered as long-term capital gain and taxed at 20% with indexation benefit.
- Safekeeping is the biggest issue.
- As design and fashion change, breaking old jewellery and converting them into new may be a costly affair.
Let me give you an example of how the gold jewellery price arrived for you while buying and why it is one of the costly modes also.
If your jeweller quotes Rs.50,000 for ten gms of 22K gold, and if you are buying a gold bangle that weighs nine grams, the jeweller will calculate the price of the item by
Rate of 1gm of gold = Rs.5,000
Wastage – 15% – 0.81 gms
Chargeable gold weight – 9 gms + 0.81 gms = 9.81 grams
Gold charge for 9.81 grams = Rs.5,000*9.81 = Rs.49,050
Making charges = 8% of Rs.49,050 = Rs.3,924
Total price = Rs.49,050 + Rs.3,924 = Rs.52,974
GST (calculated on total price) = 3% of Rs.52,974 = Rs.1,589
The total billing amount is Rs.49,050 (9 Gram Gold + Wastage)) + Rs.3,924 (Making Charges) + Rs.1,589 (GST) = Rs. 54,563.
Many jewellers may not play with the price. But the play with the making charges and wastage. Hence, you have to be cautious in dealing with them. The above wastage and making charges are just for illustrative purposes. These vary based on the design and make of jewellery.
# Gold Bars and Coins
Bars and coins are the next most popular form of gold bought in India. You can purchase these from any jeweller, bank, NBFC, or through bullion traders.
- Buying gold bars, coins, and biscuits is buying gold in its purest form. They usually come in tamper-proof covers.
- Storage is still an issue here also like gold jewellery.
- Even though making charges or wastage is not applicable for gold bars and coins, they are usually sold at a price higher than the 22-carat gold price.
- Liquidity is a concern. While the banks will readily sell you the gold, they won’t buy it back due to RBI regulations. You need to approach a jeweller or bullion trader if you want to sell the gold back.
- Taxation is the same as physical gold including GST.
- If you love to feel gold and do not believe in the electronic format of gold, then you can explore it.
# Gold ETF (Exchange Traded Funds)
Exchange Traded Funds (ETFs) track the value of an index they set for. Hence, in the case of the Gold ETF, they track the gold index.
Gold Exchange Traded Funds (ETF) are open-ended mutual fund schemes that invest in standard gold bullion of 0.995 purity. Gold ETFs are sold in units representing 1 gram of gold and are listed on the stock exchanges, where they are traded. These are passively managed funds, Net Asset Value (NAV) of the gold ETF changes according to the variation in gold prices. These are designed to provide returns that would closely track the returns from physical gold. Why closely because some part of the corpus is kept aside in cash or liquid funds to take care of redemption. These ETFs are regulated by SEBI. To be able to invest in gold ETFs, you need a demat account and a trading account with a broker.
Currently, there are around 11 Gold ETFs available in the Indian market.
- As there are no making charges and wastage, they are more cost-effective than the physical gold format of buying.
- These funds are required to hold an equivalent quantity of standard gold bullion of 99.5% purity.
- It involves demat account opening charges and maintenance charges. There is also the fund management fee of around 0.5%, which gets deducted from the NAV of the fund and the brokerage expenses based on your transaction. Hence, you have to bear two costs here.
- Investors can liquidate their holdings quickly at prevailing market prices. But there should be buyers. If there is a liquidity crunch, then obviously selling may be an issue. You may assume that selling these ETFs is like selling the stock in the market. Buyers should be there with your agreed price and then only the transaction will get executed.
- Effective from 1st April 2023, the gain is taxed as per your tax slab (irrespective of short-term or long-term holding). Whatever you invested earlier, for, if your holding period is less than three years, then the gain will be taxed as per your tax slab. However, if your holding period is more than three years, then the gain will be taxed 20% with indexation.
- Ideally better to consider the funds that have high trading volume and also manage with less cash holding.
As of now, the available Gold ETFs are as below.
|List of Gold Funds in India (as of 20th Nov 2023)|
|Fund Name||Expense Ratio||Launch Date||AUM|
|Aditya Birla Sun Life Gold ETF||0.54||2011-05-13||611|
|Axis Gold ETF||0.54||2010-11-10||737|
|DSP Gold ETF||0.54||2023-04-28||124|
|HDFC Gold Exchange Traded Fund||0.59||2010-08-13||3,696|
|ICICI Prudential Gold Exchange Traded Fund||0.5||2010-08-24||3,979|
|Invesco India Gold ETF||0.55||2010-03-12||92|
|Kotak Gold ETF||0.55||2007-07-27||2,627|
|LIC MF Gold ETF||0.41||2011-11-09||101|
|Mirae Asset Gold ETF||0.34||2023-02-20||17|
|Nippon India ETF Gold BeES||0.79||2007-03-08||7,716|
|SBI Gold ETF||0.66||2009-04-28||3,101|
|UTI Gold Exchange Traded Fund||0.62||2007-03-12||801|# Gold Mutual Funds
Gold Savings Funds are open-ended schemes that invest in Gold ETF funds of the same AMC like Birla SunLife Gold Fund will invest in Birla SunLife Gold ETF or Reliance Gold Savings will invest in Reliance Gold Savings ETF. As they invest in another mutual fund the Gold Savings Fund is also called Gold Fund of Funds (FoF). These funds invest in gold ETFs so that you don’t need to have a demat account. Therefore, the NAV is indirectly linked to the price of the metal. To be fair, both gold ETFs and gold funds are mutual fund products — only the mode of purchase differs.
No need to have a demat account to invest in such Gold Funds. In simple, you can invest in these funds like how you invest in other mutual funds.
You can set up the SIP also and the minimum amount of such SIP varies from fund to fund. Ideally less than ETF (where you have to buy a minimum of one unit which means one gram of gold).
Liquidity is not an issue as you are requesting the redemption directly to the mutual fund company but not selling the units like ETF. Hence, you do not need to bother about the liquidity.
However, the cost is higher than holding the ETF. Mainly because the fund has to pay the ETF charges and also the fund management fees. Hence, obviously, it will be more costly than the ETF.
The available gold funds as of now are as below.
|List of Gold Funds in India (as on 20th Nov 2023)|
|Fund Name||Expense Ratio||Launch Date||AUM|
|Aditya Birla Sun Life Gold Fund – Direct Plan||0.15||2013-01-01||268|
|Axis Gold Fund – Direct Plan||0.17||2013-01-01||328|
|DSP Gold ETF FoF – Direct Plan||—||—||—|
|Edelweiss Gold and Silver ETF FoF – Direct Plan||0.2||2022-09-14||69|
|HDFC Gold Fund – Direct Plan||0.18||2013-01-01||1,536|
|ICICI Prudential Regular Gold Savings Fund (FOF) – Direct Plan||0.09||2013-01-01||688|
|Invesco India Gold Fund – Direct Plan||0.2||2013-01-01||60|
|Kotak Gold Fund – Direct Plan||0.15||2013-01-01||1,460|
|LIC MF Gold ETF FoF – Direct Plan||0.26||2013-01-01||42|
|Motilal Oswal Gold and Silver ETFs FoF – Direct Plan||0.16||2022-10-13||30|
|Nippon India Gold Savings Fund – Direct Plan||0.13||2013-01-01||1,469|
|Quantum Gold Fund||0.78||2008-02-22||160|
|Quantum Gold Savings Fund – Direct Plan||0.06||2011-05-19||87|
|SBI Gold Fund – Direct Plan||0.1||2013-01-01||1,361|
|UTI Gold ETF FoF – Direct Plan||0.1||2022-10-28||77|
# Sovereign Gold Bonds
These are the bonds issued by RBI at a regular frequency. Either you can subscribe to a new issue or buy the older one from the secondary market. I have provided the list of all available earlier SGBs here “List Of Sovereign Gold Bonds In India 2015 – 2023“.
# Who can invest?
Resident Indian entities including individuals (in his capacity as such individual, or on behalf of a minor child, or jointly with any other individual.), HUFs, Trusts, Universities, and Charitable Institutions can invest in such bonds.
Hence, NRIs are not allowed to participate in the Sovereign Gold Bond Scheme.
# Tenure of the Bond
The tenor of the Bond will be for a period of 8 years with an exit option from the 5th year to be exercised on the interest payment dates.
Hence, after the 5 years onward you can redeem it on the 6th, 7th, or at maturity of the 8th year. Before that, you can’t redeem.
RBI/depository shall inform the investor of the date of maturity of the Bond one month before its maturity.
# Minimum and Maximum investment
You have to purchase a minimum of 1 gram of gold. The maximum amount subscribed by an entity will not be more than 4 kgs per person per fiscal year (April) for individuals and HUF and 20 kg for trusts and similar entities notified by the government from time to time per fiscal year (April – March).
In the case of joint holding, the investment limit of 4 kg will be applied to the first applicant only. The annual ceiling will include bonds subscribed under different tranches during initial issuance by the Government and those purchased from the secondary market.
The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions.
You will receive a fixed interest rate of 2.50% per annum payable semi-annually on the nominal value. Such interest rate is on the value of money you invested initially but not on the bond value as on the date of interest payout.
Interest will be credited directly to your account which you shared while investing.
# Issue Price
The price of SGB will be fixed in Indian Rupees on the basis of a simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited (IBJA) for the last three working days of the week preceding the subscription period. The issue price of the SGBs will be less by Rs.50 per gram for the investors who subscribe online and pay through digital mode.
# Payment Option
Payment shall be accepted in Indian Rupees through cash up to a maximum of Rs.20,000/- or Demand Drafts or Cheque or Electronic banking. Where payment is made through cheque or demand draft, the same shall be drawn in favor of receiving an office.
# Issuance Form
The Gold bonds will be issued as Government of India Stock under the GS Act, 2006. The investors will be issued a Holding Certificate for the same. The Bonds are eligible for conversion into Demat form.
# Where to buy Sovereign Gold Bond?
Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated Post Offices (as may be notified), and recognized stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.
Click HERE to find out the list of banks to Sovereign Gold Bond Scheme.
# Loan against Bonds
The Bonds may be used as collateral for loans. The Loan to Value ratio will be applicable to ordinary gold loans mandated by the RBI from time to time. The lien on the Bonds shall be marked in the depository by the authorized banks. The loan against SGBs would be subject to the decision of the lending bank/institution, and cannot be inferred as a matter of right by the SGB holder.
# Liquidity of the Bond
As I pointed out above, after the 5th year you can redeem the bond in the 6th or 7th year. However, the bond is available to sell in the secondary market (stock exchange) on a date as notified by the RBI.
Hence, you have two options. You can redeem it in the 6th or 7th year or sell it secondary market after the notification of RBI.
Do remember that the redemption price will be in Indian Rupees based on the previous week’s (Monday-Friday) simple average of the closing price of gold of 999 purity published by IBJA.
You can nominate or change the nominee at any point in time by using Form D and Form E. An individual Non – resident Indian may get the security transferred in his name on account of his being a nominee of a deceased investor provided that:
- The non-resident investor shall need to hold the security till early redemption or till maturity, and
- the interest and maturity proceeds of the investment shall not be repatriable.
The Bonds shall be transferable by execution of an Instrument of transfer as in Form ‘F’, in accordance with the provisions of the Government Securities Act, 2006 (38 of 2006) and the Government Securities Regulations, 2007, published in part 6, Section 4 of the Gazette of India dated December 1, 2007.
As I explained above, you have the option to redeem only on the 6th, 7th, and 8th year (automatic and end of bond tenure). Hence, there are two methods one can redeem Sovereign Gold Bonds. Explaining both below.
a) At the maturity of the 8th year-The investor will be informed one month before maturity regarding the ensuing maturity of the bond. On the completion of the 8th year, both interest and redemption proceeds will be credited to the bank account provided by the customer at the time of buying the bond.
In case there are changes in any details, such as account number, or email IDs, then the investor must inform the bank/SHCIL/PO promptly.
b) Redemption before maturity – If you plan to redeem before maturity i.e. 8th year, then you can exercise this option on the 6th or 7th year.
You have to approach the concerned bank/SHCIL offices/Post Office/agent 30 days before the coupon payment date. Request for premature redemption can only be entertained if the investor approaches the concerned bank/post office at least one day before the coupon payment date. The proceeds will be credited to the customer’s bank account provided at the time of applying for the bond.
There are three aspects of taxation. Let us see one by one.
1) Interest Income-The semi-annual interest income will be taxable income for you. Hence, For someone in the 10%, 20%, or 30% tax bracket, the post-tax return comes to 2.25%, 2%, and 1.75% respectively. This income you have to show under the head of “Income from Other Sources” and have to pay the tax accordingly (exactly like your Bank FDs).
2) Redemption of Bond-As I said above, after the 5th year onward you are eligible to redeem it on the 6th,7th, and 8th year (last year). Let us assume at the time of investment, the bond price is Rs.2,500 and at the time of redemption, the bond price is Rs.3,000. Then you will end up with a profit of Rs.500. Such capital gain arising due to redemption by an individual is exempted from tax.
3) Selling in the secondary market of the Stock Exchange-There is one more taxation that may arise. Let us assume you buy today the Sovereign Gold Bond Scheme 2023-24 Series I and sell it on the stock exchange after a year or so. In such a situation, any profit or loss from such a transaction will be considered as a capital gain.
Hence, if these bonds are sold in the secondary market before maturity, then there are two possibilities.
# Before 3 years-If you sell the bonds within three years and if there is any capital gain, such capital gain will be taxed as per your tax slab.
# After 3 years – If you sell the bonds after 3 years but before maturity, then such capital gain will be taxed at 20% with indexation.
There is no concept of TDS. Hence, it is the responsibility of investors to pay the tax as per the rules mentioned above.
# Whom to approach in case of any issues?
The issuing banks/SHCIL offices/Post Offices/agents through which these securities have been purchased will provide other customer services such as change of address, early redemption, nomination, grievance redressal, transfer applications, etc.
Along with this, a dedicated e-mail has been created by the Reserve Bank of India to receive queries from members of the public on Sovereign Gold Bonds. Investors can mail their queries to this email id. Below is the e-mail id
RBI Email ID in case of Sovereign Gold Bonds-[email protected]
Advantages Of The Sovereign Gold Bond Scheme
# After the GST entry, this Sovereign Gold Bond may be advantageous over physical Gold coins or bars. This product will not come under GST taxation. However, in the case of Gold coins and bars, earlier the VAT was at 1% to 1.2%, which is now raised to 3%.
# If you hold it till maturity or redeem it as and when the bonds are eligible, then the gain is tax-free.
# If your main purpose is to invest in gold, then apart from the physical form, investing in ETF or in Gold Funds, seems to be a better option. Because you do not need to worry about physical safekeeping, no fund charges (like ETF or Gold Funds) and the Demat account is not mandatory.
# In Sovereign Gold Bond, the additional benefit apart from the typical physical or paper gold investment is the annual interest payment on the money you invested.
Hence, there are two types of income possibilities. One is interest income from the investment and the second is price appreciation (if we are positive on gold). Hence, along with price appreciation, you will receive interest income also.
But do remember that such interest income is taxable. Also, to avoid tax, you have to redeem it only on the 6th, 7th, or 8th year. If you sell in the secondary market, then such gain or loss will be taxed as per capital tax gain rules.
# There is no TDS from the gain. Hence, you do not need to worry about the TDS part like Bank FDs.
# A sovereign guarantee of the Government of India will make you SAFE.
Disadvantages Of The Sovereign Gold Bond Scheme
# If you are planning to invest in your physical usage after 8 years, then simply stay away from this. Because Gold is an asset, which gives you volatility like the stock market but the returns of your debt products like Bank FDs or PPF.
# The key point to understand is also that the interest income of 2.5% is on the initial bond purchase amount but not the yearly bond value. Hence, let us say you invested Rs.2,500, then they pay interest of 2.5% on Rs.2,500 only even though the price of gold moved up and the value of such investment is Rs.3,000.
# Liquidity is the biggest concern. Your money will be locked for 5 years. Also, redemption is available only once a year after 5th year.
In case you want to liquidate in a secondary market, then it is hard to find the right price, and capital gain tax may ruin your investment.
In case you want to liquidate in a secondary market, then it is hard to find the right price, and capital gain tax may ruin your investment.
# Sovereign guarantee of the Government of India may feel you secure. However, the redemption amount is purely based on the price movement of the gold. Hence, if there is a fall in the gold price, then you will get that discounted price only. The only guarantee here is a 2.5% return on your invested amount and NO DEFAULT RISK.
Based on the above features of all available options, I have listed few features that are important for the investors.
|Best Gold Investment Options in India Comparison|
|Features||Gold Jewellery||Gold Bars and Coins||Gold ETFs||Gold MFs||Sovereign Gold Bonds|
|Expenses||Less than Gold Jewellery. But higher than other options.||Brokerage, Demat charges, and expense ratio (by AMC)||Safekeeping is an issue||Fund Management Charges of the AMC||Nil|
|Liquidity||Easy but again involves cost||Easy but again involves cost||Liquidity depends on the fund you have chosen. Otherwise, liquidity is an issue.||Can be redeemed easily||Low (lack of liquidity. 5 year lock-in)|
|Safety and storage||Safekeeping is an issue||Safe, as it is issued by recognized AMCs and held in Demat format.||Can be easily purchased through lump sum purchases or SIPs||Safe, as it is issued by recognized AMCs and units either in electronic or demat format||Very Safe, as it is issued by the Government and can be held either in demat or physical certificate format.|
|Ease of Purchase||Easy to buy||Easy to buy||Depends on the number of units available for sale in the market||Can be easily purchased through lump sum purchase or SIPs||Limited timeframe available for purchase, depending on the issue timeframe set by the Government.|
|Ease of Selling||Easy but costly||Easy but costly||Liquidity is a concern||Easy to sell||Before maturity, liquidity is a concern|
|Buyer Protection||No such regulation||No such regulation||Governed by SEBI regulations||Governed by SEBI regulations||Very safe, as it is issued by the Government (RBI)|
|Tax on STCG (Less than 3 Yrs)||As per IT Slab Rates||As per IT Slab Rates||As per IT Slab Rates||As per IT Slab Rates||As per IT Slab Rates|
|Tax on LTCG (More than 3 Yrs)||20% with indexation||20% with indexation||As per IT Slab Rates||As per IT Slab Rates||3 to 8 years, 20% (with indexation) &|
Nil if held till maturity
Conclusion – I have provided the complete list of buying best gold investment options in India. You noticed that the physical gold format is, to be frank, a costly way of investing in gold (especially jewellery mode). Buy jewellery for your wearing but not for the purpose of investment.
There are other formats like Digital Gold, Gold Futures, or Gold Options. I am not supporting Digital Gold as this product is as of now unregulated. Gold Futures and Gold Options are kind of derivate products that involves huge risk and I strongly suggest you avoid such a form of gold investment.
In simple, my view is that if you need gold jewellery for your own usage, then buy it. Otherwise, you can use Gold ETF, Gold Mutual Funds, or Sovereign Gold Bonds (if the need is after 8 years). Rest all forms are risky and better to avoid.