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| Parameters to consider | Digital Gold (SGB) | Physical Gold |
| Cost effectivity | You can buy gold without GST and the making charges by investing in its dematerialized form as digital gold | Cost when buying GST 3% on gold price and 5% on making charges Cost when selling STCG /LTCG tax depending on the period of holding |
| Interest income | Gold bonds earns interest as an additional income for the investors | There is no interest income here except only capital gains |
| Taxation | These investments are more tax efficient as capital gains upon maturity are completely tax-free. But the interest payouts are taxable under the income tax slab rates | After three years of holding, the long-term capital gain tax of 20% with indexation benefit is applicable. Moreover, there is an additional, cess of 4% and a surcharge while selling physical gold. In the short term (before three years), the gains are taxable as per the income tax slab rates. |
| Liquidity | One can trade their bonds on the stock exchange after the five year lock-in period. | Whereas upon physical gold, investors decide when to buy and when to sell and the liquidity being higher, becomes handy in emergency situations |
| Associated risks | Apart from market risk, digital gold do not carry any other risk like theft or quality compromises. | One of the biggest risks of holding physical gold is the risk of theft. Also, quality of gold may vary among the selling parties which is a major concern. |
| Investment type | The Gold bonds are issued in units. One unit is equal to 1 gram. The minimum investment is 1 gram of gold, while the maximum limit is 4 kgs of gold per investor | Gold biscuits or coins are available in the standard denominations of 10 grams. Hence, it requires a huge investment to invest in physical gold. |
| Price | The government determines the issue rate. | Physical gold prices are not uniform. |
| Lock-in period of investment | Five years a lock-in period. However, it can be traded anytime in the secondary market, but restricted liquidity can cause difficulty in bulk purchases of SGBs and market fluctuations may incur a premature loss when selling SGBs earlier before maturity | No lock-in period. The complete control of managing the asset lies with the investor. |
| Demat Account | Not required | Not mandatory. However, the investors have the option to hold their units in a demat account. |
| How to buy? | Investors can buy SGBs through banks, post offices, RBI retail direct website, stock exchanges | Physical gold can be bought from the Bullion market as bars, coins, or ingots and in gold retail stores as ornaments |
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