Priyanka Sambhav
Gold never loses it lustre as an investment. Everyone wants to possess it whether prices are soaring high or slipping to new lows. When prices move downwards, people want to buy gold and when its touching new highs those who have invested are celebrating gains and those who have not invested wait for a dip.
What is Digital Gold?
I am sure you also want to own the yellow metal, and if you own it, then you want more of it. To cash in on the ever-burgeoning demand of gold many mobile payment wallets like Paytm, Phonepay, Google pay are offering you a new way of buying gold i.e. digital gold. Few jewellers are also offering it through their app and website. The most significant feature of digital gold is that a consumer can buy 24Karat 99.9% purity certified gold for as low as Rs 1. It is precisely like purchasing gold only that you don’t get to possess the physical gold.
How can you buy?
You can buy digital gold online through wallets like Paytm, Google pay and Bharat Pe or some financial institutions like Motilal Oswal and Baja Finserv or from Stock Holding Corporation India. These platforms are selling gold in collaboration with three companies – state-owned MMTC- PAMP (Produits Artistiques Métaux Précieux), Safegold and AUGMONT enterprises. The fineness and purity may differ from company to company, and that’s why you will find a price difference between the wallets. The purchased gold is kept in a fully secured vault. When you want to sell the gold, you can do that in the respective platform and money will be credited to your account. If you wish to get physical gold then you request for delivery too. Digital gold will be converted into either coins or bullions and delivered to your doorstep. Keep in mind that rules and charges will differ from one platform to other.
Advantages of Digital Gold
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You purchase the gold digitally from the recognized provider and they store the gold for you so need not be worried about storage, safety and purity.
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The cost involved depends upon how much you want to invest? As low as Rs 1 to Rs 10,000 – it is up to your payment capacity; it lets you buy a small quantity. One can even buy 0.50 gm of digital gold.
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Some platforms allow Systematic investment option as well. You can plan a monthly SIP.
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Ease of liquidity with it gives this investment a big plus point. You can redeem it just by a click of a button and multiple redemptions is allowed.
Disadvantages of Digital Gold
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You should know that no regulator is overlooking the digital gold process. The digital platform purchases it and stores it in the vault but who is checking the quality and quantity of the gold? No one! In case of Gold ETF there is SEBI and incase of Sovereign gold bond RBI regulates it, but as far as this gold is concerned there is no regulator.
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You will have to pay a storage charge. If you decide to take physical delivery, then you will have to pay delivery charges and making charges as well.
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There is a cap on the investment period by a few of the companies. Like investors of MMTC- PAMP’s digital gold have to mandatorily take delivery or sell the digital gold after a tenure of 5-years, or else you will have to pay extra charges.
Tax on Digital Gold
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When you buy digital gold, you will pay 3% GST on it.
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If you sell it within 3 years of purchase, you will have to pay short term capital gains tax. The earned profit will be added to your income and you will be taxed according to your income slab.
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When you sell it after 3 years, then you will pay long term capital gains tax of 20% + 4% cess with indexation benefit on the price.
