{"id":38527,"date":"2024-05-10T10:00:53","date_gmt":"2024-05-10T04:30:53","guid":{"rendered":"https:\/\/flattrade.in\/kosh\/?p=38527"},"modified":"2024-05-10T12:47:27","modified_gmt":"2024-05-10T07:17:27","slug":"the-difference-between-investing-in-physical-gold-and-digital-gold-sgb","status":"publish","type":"post","link":"https:\/\/flattrade.in\/kosh\/the-difference-between-investing-in-physical-gold-and-digital-gold-sgb\/","title":{"rendered":"Physical gold vs Digital gold, which is best to invest?"},"content":{"rendered":"\t\t
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Parameters to consider<\/b><\/strong><\/span><\/td>Digital Gold (SGB)<\/b><\/strong><\/span><\/td>Physical Gold<\/b><\/strong><\/span><\/td><\/tr>
Cost effectivity<\/span><\/td>You can buy gold without GST and the making charges by investing in its dematerialized form as digital gold<\/span><\/td>

Cost when buying<\/b><\/strong><\/span><\/p>

GST 3% on gold price and 5% on making charges<\/span><\/p>

Cost when selling<\/b><\/strong><\/span><\/p>

STCG \/LTCG tax depending on the period of holding<\/span><\/p><\/td><\/tr>

Interest income<\/span><\/td>Gold bonds earns interest as an additional income for the investors<\/span><\/td>There is no interest income here except only capital gains<\/span><\/td><\/tr>
Taxation<\/span><\/td>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<\/span><\/td>

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.<\/span><\/p>

In the short term (before three years), the gains are taxable as per the income tax slab rates.<\/span><\/p><\/td><\/tr>

Liquidity<\/span><\/td>One can trade their bonds on the stock exchange after the five year lock-in period.<\/span><\/td>Whereas upon physical gold, investors decide when to buy and when to sell and the liquidity being higher, becomes handy in emergency situations<\/span><\/td><\/tr>
Associated risks<\/span><\/td>Apart from market risk, digital gold do not carry any other risk like theft or quality compromises.<\/span><\/td>

One of the biggest risks of holding physical gold is the risk of theft.<\/span><\/p>

Also, quality of gold may vary among the selling parties which is a major concern.<\/span><\/p><\/td><\/tr>

Investment\u00a0type<\/span><\/td>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<\/span><\/td>Gold biscuits or coins are available in the standard denominations of 10 grams. Hence, it requires a huge investment to invest in physical gold.<\/span><\/td><\/tr>
Price<\/span><\/td>The government determines the issue rate.<\/span><\/td>Physical gold prices are not uniform.<\/span><\/td><\/tr>
Lock-in period\u00a0of investment<\/span><\/td>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<\/span><\/td>

No lock-in period.<\/span><\/p>

The complete control of managing the asset lies with the investor.<\/span><\/p><\/td><\/tr>

Demat Account<\/span><\/td>Not required<\/span><\/td>Not mandatory. However, the investors have the option to hold their units in a demat account.<\/span><\/td><\/tr>
How to buy?<\/span><\/td>Investors can buy SGBs through banks, post offices, RBI retail direct website, stock exchanges<\/span><\/td>Physical gold can be bought from the Bullion market as bars, coins, or ingots and in gold retail stores as ornaments<\/span><\/td><\/tr>