How to Invest in Gold in India?

What is the best way to invest in gold in India?

What are all the different ways to invest gold in India?

How can I / we invest in gold in India?

What are all the various gold investment options available to Indian Investors?

Let us discuss in detail about how to buy gold in India for investment purpose.

These questions are usually wondered by investors looking for the best gold investment plan, types of gold investment, and the best way to invest in gold in India.

Table of Contents:

1. Gold as an investment option
2. Return on gold investment

• Jewellery buying
• Investment in Gold coins and bars
• Gold ETF
• Gold Fund of Funds

3. Gold ETFs Vs Gold Fund of Funds
4. Gold ETF vs Physical Gold: Which Is Better for Investors?
5. Equity based Gold Funds
6. Sovereign Gold Bond Scheme
7. How much to invest in Gold?
8. Who Should Avoid Gold?
9. Is it right time to invest in gold?
10. How to start investing in Gold online?

1. Gold as an investment option

Before proceeding further let us answer a basic question in our mind.

Why to invest in gold?

Should I invest in gold?

Is gold a good investment option?

It is your hard earned money. So you need to answer these questions before investing in gold.

Why do people invest in Gold? What are all the benefits of investing in gold?

There are 2 primary reasons why you need to invest in gold.

• Investing money in gold is worth because it is a hedge against inflation. Over a period of time, the return on gold investment is in line with the rate of inflation.
• It is worth investing in gold for a one more very valid reason. That is gold is negatively correlated to equity investments. Say for example 2007 onwards, the equity markets started performing poorly whereas the gold has performed well. So having gold as an investment option in your portfolio mix will help you reduce the overall volatility of your portfolio.

The above 2 points could have given some answers to your question “Is buying gold a good investment?”

Modern investors also view gold as a safe-haven asset and actively search for why invest in gold, benefits of investing in gold, and gold as an investment in India.

2. Return on gold investment

Still, if you want to invest in Gold in India and cannot resist yourself from the temptation then these are few tips on how to invest in gold correctly!

Long-term investors often compare gold investment returns in India with other assets before deciding the best way to buy gold or how much to invest in gold.

i. Jewellery buying

Our age-old and traditional way of investment is jewellery buying where one can buy gold ornaments, bars or coins.

However, it has its own disadvantages, total buying cost involves heavy making charges (it can be 10 to 20% of total cost).

However, when you try to sell the same piece to the same jeweller, he will buy it below market rates and deduct those making charges from the total price of your jewel.

Many still confuse gold jewellery buying with best gold investment, even though it is not the ideal gold investment option.

Taxability of Gold Jewels

As per the Indian Income Tax norms, you will be incurred with two taxes while you buy physical Gold. GST on the value of Gold and GST on making the charge.

• If the jeweller does NOT bill separately for Gold and making charge, then you have to pay 3% GST for the (billed amount) value of Gold.
• If the jeweller bills separately for Gold and making charge, then you have to pay 3% GST for the value of Gold and 5% GST for making charge. The GST, while you sell physical Gold is calculated based on the holding period. Since Gold is considered as a Capital Asset, it is accountable to Capital Gain tax.
• If the holding period is less than 3 yrs, Short Term Capital Gains is taxed as per your income tax slab.
• If the holding period is more than 3 yrs, Long Term Capital Gains is taxed at 20% with indexation benefits.

These tax rules are important to understand for anyone exploring investment in gold in India, gold coin investment plan, or physical gold investment in India.

ii. Investment in Gold coins and bars

Investment in gold coins and bars is also a better option over jewel buying. You need to decide on ‘Where to buy gold coins or bars?”.

You should buy gold bars and coins only from a jeweller. However, Banks also sell gold coins or bars.

Then why do we advocate for buying gold bars and coins from jewelers?

To answer this question, you ask yourself “How to sell gold coins or bars in India?” or “Where to sell gold coins in India?”

Banks sell gold coins and bars, but don’t buy gold coins from the bank, because they cannot buy it back.

Whereas, the jewelers can buy back the gold coins from you.

Investors looking for best gold for investment often compare gold coins’ vs gold bars, especially when choosing types of gold investments in India.

How to invest in Physical Gold in India?

The point 1) and 2) could have proved that it is better to invest in the physical gold by way of gold coins or bars sold by the jewellers in India.

In the next points 3) and 4) we will discuss about the paper gold investment options in India.

Physical gold is ideal for those wanting tangible gold investment types, while others prefer digital gold, gold ETFs, or gold SIP for convenience.

Taxability of Gold Coins

The taxation while buying and selling Gold coins and bars are the same as that of Gold jewellery.

The only advantage of buying Gold coins is that it incurs no or least making charges. This reduces the taxation on making charges.

This makes gold coins one of the best gold investment options for conservative and long-term investors.

iii. Gold ETF

What is Gold Exchange Traded Fund?

Gold exchange traded fund is a type of mutual fund which in turn invests in gold and the units of this mutual fund scheme is listed in the stock exchange.

How to invest in Gold ETFs in India?

You need to buy Gold ETFs from the stock exchange by way of opening a Demat account and trading account.

You have to pay brokerage fee (which is generally between 0.25% and 0.5%) for buying and selling of these Gold ETFs in India.

You will have to further pay 0.5 to 1 % charges as fund management charges.

Gold ETFs are among the most preferred gold investment options in India, especially for those searching for how to invest in gold online or invest in gold through Demat account.

Taxability of Gold ETF

There is no GST when you buy Gold ETF.

The STCG and LTCG taxation while buying and selling Gold ETF is the same as that of Gold jewellery.

Understanding the overall mutual fund expense structure is essential here because similar cost principles apply to Gold ETFs as well.

iv. Gold Fund of Funds

What is Gold Fund in India?

Gold fund is a Fund of Fund which will invest in Gold ETFs on behalf of you.

Best part here is that you do not require holding any Demat a/c here.

Then how to invest in Gold Mutual Funds?

Just like investing in other mutual fund schemes.

As this is like any other mutual fund scheme, SIP investment in gold is possible through these gold funds.

Still buying Gold fund of fund is little expensive option, as you have to pay

1) Annual management charges for the underlying Gold ETF

2) Annual management charges of Gold FOF Scheme.

Investors should also be aware of the recurring expenses in mutual funds, especially the combined cost impact in a Fund of Fund structure.

Taxability of Gold FOF

The taxation while buying and selling Gold Fund of Fund is same as that of Gold jewellery.

3. Gold ETFs Vs Gold Fund of Funds

With Gold ETFs, you need to open Demat account and pay broking charges.

With Gold Mutual Funds, you need to bear the additional charges charged by the Gold Fund of Fund.

If you are buying in less quantity, then gold mutual funds may be suitable.

If you are buying in more quantity then you can negotiate for the lesser brokerage charges from your stock broker, hence gold ETF may be suitable.

4. Gold ETF vs Physical Gold: Which Is Better for Investors?

When most people think about investing in gold, the first option that comes to mind is physical gold—jewellery, coins, or bars.

But with the rise of digital investing, Gold ETFs have emerged as a smarter and more efficient alternative.

Understanding the difference helps you choose the right option based on your goals, costs, and convenience.

Physical gold gives you emotional satisfaction, instant ownership, and tangibility.

However, it comes with challenges like making charges, storage issues, safety risks, and lower resale value due to purity deductions and wastage cuts.

On the other hand, Gold ETFs offer a modern, hassle-free way to invest in 24K gold without physically holding it.

Because they are traded on the stock exchange, investors get high liquidity, transparent pricing, no storage cost, and zero making charges.

They track the real-time price of gold and are ideal for long-term wealth building.

In simple terms:

• If you want convenience, transparency, and lower expenses, Gold ETFs win.
• If you want physical possession for personal use or gifting, physical gold may suit you.

For pure investment purposes, Gold ETFs are generally considered more efficient, cost-effective, and secure.

5. Equity based Gold Funds

Here these funds are directly not investing in Gold but investing in the companies, which are related to the mining, extracting and marketing of the Gold.

Besides, its performance is purely dependent upon the performance of the fund house and the equities they are investing.

In the other 4 options, your investment performance will be directly linked to the price movement in gold in India.

However, investment in these funds is suitable for investors with high-risk appetite.

• As these are equity-based funds, equity risk is there.
• There are no listed companies in India associated with Gold. Therefore, these funds trade in international market and quiet susceptible to currency-risk apart from gold-risk and equity based risk.

Therefore, after assessing or weighing pros and cons of each gold investment option, one can conclude that Gold ETFs and Gold Funds are safest, profitable and most preferred options among the various alternatives.

Always check the net expense ratio mutual fund section of such gold-themed equity funds, as it directly influences long-term returns.

Taxability of Equity-based Gold Funds:

Since you do not invest directly in Gold, your tax treatment will be as per equity income norms.

• If the equity share is held for a period of less than 12 months, it is considered as STCG. The tax percentage is 15% for STCG on equity.
• If the equity share is held for a period of more than 12 months, it is considered as LTCG. There is no tax for LTCG on equity.

6. Sovereign Gold Bond Scheme

What is Sovereign Gold Bond Scheme? It is a government gold security bond issued by RBI on behalf of the Indian Government.

The ways how you can buy SGB are selective banks/SHCIL/post offices/online.

The benefits of investing in SGB are really attractive. SGB investment is considered as safest because the issuer is RBI.

Also there is an additional interest of 2.5% along with the benefits of appreciation in Gold price.

Taxability of Sovereign Gold Bond Scheme

The interest from the gold bond is taxable as per Income Tax Act 1961 (43 of 1961).

The capital gains arising on redemption of SGB after maturity is tax exempted.

You can also avail indexation benefits on LTCG when you transfer the bond to other person.

While comparing SGBs with other options, it is also useful to understand the expense ratio of a mutual fund and how such charges don’t apply to SGBs, making them cost-efficient.

7. How much to invest in Gold ?

5% to 10% of your over assets can be invested in gold.

If you invest more in gold, remember in the long term return on gold investment is less than 10% p.a.

8. Who Should Avoid Gold?

Gold is often seen as a safe-haven asset, but it’s not suitable for every investor.

If your primary goal is high long-term returns, gold may not fit your strategy because its long-term average return is below 10% per annum, which is lower than equity or hybrid investments.

Investors who are aiming for aggressive wealth creation, such as young earners or those preparing for long-term goals like retirement or their child’s education, may find gold too slow and inefficient as a core investment.

You should also avoid over-investing in gold if you struggle with short-term liquidity needs.

Physical gold comes with making charges, storage issues, GST, and resale deductions, while SGBs have a lock-in period, making them unsuitable for people who need quick access to their money.

Similarly, investors who do not understand market volatility or cannot tolerate price fluctuations may also find gold stressful, since gold prices can remain stagnant for years.

In short, gold is not ideal for risk-takers, short-term investors, or those dependent on faster-growing asset classes.

It is best used as a diversification tool—not the main pillar of your investment portfolio.

9. Is it right time to invest in gold?

Many times I have faced questions similar to “When to invest in gold?” or “Should I invest in gold now?”

There is no right or wrong time to invest in gold.

You need to invest in gold for long term ( 5+yrs).

It is better to stagger your investments over a period of time to average out the cost of purchase.

10. How to start investing in Gold online?

You can start investing in gold in India by online either by investing in gold ETF or by investing in gold funds.

Gold funds in India can also be bought online just like investing in other mutual funds online.

The above compilation on different methods of investing in gold could have given you more clarity about investing in gold.

Clarity is power when comes to taking investment decisions.

Like the investment in Gold, if you would like to know the other good investment options and also to make sure these good investment options are really suitable for your financial goals or not, you can take advantage of our knowledge resource.