buying gold There has been a tradition in India during Diwali and Dhanteras. The demand for gold – especially physical gold in the form of jewelry and coins – increases during this time. However, in view of coronavirus Pandemic, when going to a jewelery store is still considered as a risk, more and more people in India are investing in digital gold. Individuals can buy digital gold from sellers and refiners through various platforms. There are three companies offering Digital Gold – Augmont Gold; MMTC-PAMP India Pvt. Ltd., a joint venture between state-run MMTC Ltd. and Swiss firm MKS PAMP; and Digital Gold India Pvt. Ltd. with its SafeGold brand. One can buy digital gold through popular wallets including Paytm, Amazon Pay, Google Pay and PhonePe.
“Digital gold is increasingly attracting the attention of investors as it offers all the benefits of gold and more. Ashraf Rizvi, Founder and CEO, Digital Swiss Gold & Gilded, said it is simply physical gold purchased digitally and easily through a mobile app, which negates the need to visit the store.
Easy availability and low price are two reasons behind the immense popularity of digital gold in recent times. Here are the key things you should keep in mind while buying digital gold
purity
One of the first things investors should check before buying digital gold is purity. “Digital gold purchased from MMTC-PAMP is likely to be more pure than gold purchased from the platform in association with SafeGold,” said Pranjal Kamra, CEO, Finology.
Price starts from as low as Rs.1
The price of digital gold starts from Rs. Investing in digital gold allows customers to buy fractional physical gold for a small investment, said Ashraf Rizvi of Digital Swiss Gold & Gilded.
Storage
“The gold you buy is centrally stored and shown to you in the form of a digital vault balance of the number of grams you own. You can either have this gold with you,” said Prakash Gadani, chief executive officer, 5Paisa. There is an option to take delivery, or sell it on the application directly from your vault.
GST and other charges
Buying digital gold will attract 3 per cent GST on the value of your gold, just like in the case of buying physical gold. Digital gold providers also charge an additional fee of 2-3 percent for expenses such as the cost of storage, insurance and trustee fees. If the customer wants to convert digital gold into physical gold, making charges will be levied based on the quantity. Investors may also have to pay an additional fee to have it delivered to your home.
maximum holding period
Digital gold products have a maximum holding period after which the investor has to take delivery of the gold or sell it back. Different merchants impose different holding period conditions for digital gold.
“After holding your digital gold for 5 years with MMTC-PAMP, you will either have to sell the gold or convert it into gold coins. Hence, you need to read the FAQs carefully, especially regarding the holding period and investment limit, before buying digital gold,” said Pranjal Kamra, Finology.
tax on digital gold
The holding period of digital gold determines how much tax the investor will have to pay. If the digital gold is held for less than 36 months, the return is not directly taxed. Long term capital gains from digital gold attracts 20% tax on returns along with applicable surcharge and 4% cess.
Loss
“A major disadvantage of buying digital gold is the lack of any regulatory mechanism in the digital gold space, whereas gold funds come under the regulatory jurisdiction of the Securities and Exchange Board of India (SEBI). Investors can easily invest in gold funds and redeem them through mobile apps or websites of various mutual fund houses, investment platforms and marketplaces,” said Naveen Kukreja, Co-Founder and CEO, Paisabazaar.com.
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