Digital Gold vs Gold ETFs vs SGBs: Best Way to Invest in Gold in 2025

For generations, Indians have trusted gold. It’s not just for weddings and festivals; it’s a smart investment that can protect your money from inflation and diversify your portfolio. But buying jewellery is no longer the only, or even the best, way to own gold.

Today, you can invest in gold with just a few clicks. The three most popular methods are Digital Gold, Gold ETFs (Exchange-Traded Funds), and Sovereign Gold Bonds (SGBs). Each has unique benefits and drawbacks. But which one is right for you? This guide will help you decide.

Key Takeaways

• Sovereign Gold Bonds (SGBs) are the most tax-efficient option for long-term investors. If held for the full 8-year term, capital gains are tax-free. Plus, they offer a 2.5% annual interest payout. However, the government has not issued new SGBs since early 2024, so they can only be bought from the secondary market.
• Gold ETFs are ideal for liquidity and short-term trading. They trade on stock exchanges like shares, have low costs, and are regulated by SEBI. However, capital gains are taxed at your income tax slab rate.
• Digital Gold is the easiest way to buy gold in tiny amounts (as low as ₹1). However, it includes a 3% GST on every purchase and is not regulated by SEBI or the RBI, posing a higher platform risk.

1. Digital Gold: The Instant and Easy Option

Digital Gold is the simplest way to start. Platforms like Groww, Upstox, Paytm, and Google Pay have partnered with providers like MMTC-PAMP or SafeGold to offer 24K gold that you can buy and sell instantly.

Pros:

• Micro-Investment: You can invest as little as ₹1, making it perfect for students and young earners.
• High Convenience: Buy or sell 24/7 directly from your smartphone.
• Purity Guaranteed: You get 99.9% pure 24K gold, stored in insured vaults on your behalf.

Cons:

• GST on Purchase: A 3% Goods and Services Tax (GST) is charged on every purchase, similar to physical gold. This cost is not recovered upon sale.
• Price Spread: A difference of 2-3% often exists between the buying and selling price, which can reduce your returns.
• No Regulation: Digital Gold is not directly regulated by SEBI or the RBI, which means there is a higher risk associated with the platform’s credibility and solvency.
• Storage Limits: Most providers offer free storage for a limited period (typically 5 years), after which you may need to take physical delivery or pay storage fees.

How to Buy: Open a platform like Groww, Upstox, or a mobile wallet, search for “Digital Gold,” enter the amount, and complete the payment.

2. Gold ETFs: The Stock Market Route

A Gold ETF is a fund that invests in physical gold bullion. These funds are listed on stock exchanges (NSE/BSE), and you can buy and sell their units just like you would trade shares of a company. One unit of a Gold ETF typically represents the value of 1 gram or 1/10th of a gram of gold.

Pros:

• High Liquidity: You can buy and sell units anytime during stock market hours at live gold prices.
• Low Cost: The annual fee, known as the expense ratio, is low, typically ranging from 0.4% to 0.8%.
• Regulated & Safe: Gold ETFs are regulated by SEBI, making them a secure investment. The underlying gold is held by a custodian in insured vaults.
• No GST: Unlike Digital Gold, there is no GST on the purchase of Gold ETF units.

Cons:

• Demat Account Required: You must have a Demat and trading account to invest in ETFs.
• Taxation: Gains from Gold ETFs are added to your total income and taxed according to your income tax slab. The previous benefit of long-term capital gains with indexation was removed for investments made after March 31, 2023.
• Minor Extra Costs: You will incur small brokerage charges when you buy and sell units.

How to Buy: Log in to your Demat account with a broker like Zerodha or Upstox, search for a Gold ETF ticker (e.g., GOLDBEES, HDFCGOLD), and place a buy order.

3. Sovereign Gold Bonds (SGBs): The Government-Backed Powerhouse

SGBs are government securities issued by the Reserve Bank of India (RBI). They are considered the safest option as they are backed by the Government of India. They track the price of gold and pay you additional interest.

Pros:

• Extra Interest: You receive a fixed interest of 2.5% per year on your initial investment, paid semi-annually. This is in addition to any gains from the appreciation of gold prices.
• Tax-Free Maturity: This is the standout feature. If you hold SGBs for the full 8-year maturity period, the capital gains are completely tax-free.
• No Purity or Storage Hassles: Since SGBs are held in paper or Demat form, there are no concerns about storage, insurance, or purity.

Cons:

• Limited Availability: Crucial Update: The RBI has not issued any new SGB tranches since February 2024. As of July 2025, your only option is to buy existing bonds from other investors on the stock exchange (secondary market), which may trade at a premium.
• Lock-in Period: SGBs have a maturity period of 8 years. While you can exit after the 5th year or sell on the stock exchange, they are less liquid than ETFs.
• Minimum Investment: The minimum investment is 1 gram of gold, which can be a higher entry point than Digital Gold.

How to Buy: Since new issues are currently unavailable, you can purchase SGBs through your Demat account on the stock exchange. Search for different SGB series (they trade with unique symbols) and place a buy order like you would for a stock.

Head-to-Head Comparison

Feature	Digital Gold	Gold ETFs	Sovereign Gold Bonds (SGBs)
Issuer	Private Companies (e.g., MMTC-PAMP)	Mutual Fund Houses (AMCs)	Reserve Bank of India (RBI)
Regulation	Unregulated	SEBI Regulated	RBI / Govt. of India
Costs	3% GST + 2-3% Spread	0.4% - 0.8% Expense Ratio + Brokerage	No issue cost (may trade at a premium in secondary market)
Extra Returns	None	None	2.5% annual interest
Liquidity	Very High (24/7)	High (During Market Hours)	Low (8-year lock-in, but tradable on exchange)
Taxation on Gains	Taxed like physical gold (LTCG at 20% with indexation after 3 years)	Added to income and taxed at your slab rate	Tax-Free if held for 8 years
Minimum Investment	As low as ₹1	1 Unit (price varies)	1 Gram of Gold
Demat Account	Not Required	Required	Required to trade on exchange

Which One is Best for You?

• For the Long-Term, Tax-Savvy Investor: Sovereign Gold Bonds (SGBs) are unbeatable. The combination of 2.5% extra interest and tax-free returns on maturity makes them the most profitable option for an 8-year horizon. The main challenge is acquiring them at a fair price in the secondary market.

• For the Active Trader & Short-Term Investor: Gold ETFs are the clear winner. They offer high liquidity, low costs, and the flexibility to trade based on market fluctuations. They are perfect if you want to actively manage your gold allocation.

• For the Absolute Beginner & Small Saver: Digital Gold is an excellent entry point. It’s the easiest way to start investing in gold with very small amounts. However, due to the 3% GST and lack of regulation, it is less suitable for large or long-term investments.

Ultimately, the “best” option depends on your financial goals, investment timeline, and risk tolerance.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please conduct your own research before making any investment decisions.