India’s obsession with gold is legendary. Households—especially women—own an estimated 24,000 tonnes of gold jewellery, exceeding the combined official reserves of the U.S., Germany, Italy, France, and Russia. This stockpile equals nearly 40% of the country’s GDP, showing how deeply gold is embedded in both culture and wealth.
India’s gold demand rose 5% in 2024 to 802.8 tonnes, with 563.4 tonnes coming from jewellery. But today’s investors—particularly millennials—are shifting from physical to digital formats. Over 65% of millennials prefer digital gold, citing better returns, flexibility, and ease of access.
One Tax Rule for All Forms
Regardless of the form—jewellery, ETFs, digital gold, or mutual funds—gold in India is taxed uniformly. Gains on sales within 24 months are taxed as per the individual’s income slab. If held for more than 24 months, they qualify as long-term capital gains (LTCG) and are taxed at a flat 12.5%, with no indexation benefits. Additionally, during tax assessments, jewellery up to 500 grams for married women, 250 grams for unmarried women, and 100 grams for men is not questioned—even without proof of purchase.
Jewellery: Emotion Over Efficiency
Gold jewellery remains deeply tied to Indian tradition—used in weddings, festivals, and passed down generations. Yet as an investment, it lags. Making charges (10–25%) and resale markdowns (5–10%) reduce actual value. Net annual returns average around 6.5%, lower than other formats. Despite its emotional appeal, jewellery is financially inefficient and difficult to document for taxation and valuation.
Gold ETFs
Returns with Liquidity Gold Exchange-Traded Funds (ETFs) provide clean exposure to gold, each unit typically representing 1 gram stored in secure vaults. ETFs are traded like stocks, have low expense ratios (0.3%–1%), and offer high liquidity and transparency. Over the last decade, gold ETFs in India have delivered annualised returns of approximately 11.4%. Leading ETFs such as Kotak Gold ETF, Nippon India ETF Gold Bees, and HDFC Gold ETF have consistently outperformed jewellery in both returns and convenience. With clear audit trails, ETFs also simplify tax reporting under the LTCG regime.
Digital Gold: For the Everyday Investor
Digital gold allows fractional investment—starting as low as ₹1—via mobile apps. The gold is physically stored and insured, with options to redeem as cash or take delivery. This format appeals especially to young and first-time investors. Leading platforms such as Paytm, Google Pay (with MMTC-PAMP), and Groww dominate the space. While platform fees (1–2%) slightly reduce returns, digital gold still offers 8–9% annualised returns—better than jewellery and nearly at par with ETFs for small-ticket investors. The ease of buying, selling, and record-keeping also makes it tax-compliant and accessible, particularly in semi-urban and rural areas.
Gold Mutual Funds:
Passive Exposure Gold mutual funds invest in a basket of ETFs or gold-linked assets and don’t require a demat account. They are ideal for investors looking for managed exposure without the need to track prices daily. Top funds like HDFC Gold Fund and Axis Gold Fund have offered annualised returns of 11–12% over the past five to ten years. Though expense ratios are slightly higher than direct ETFs, they offer ease and professional management. Taxation is the same: 12.5% LTCG after two years.
Picking the Right Format
Jewellery still dominates in tradition and gifting. ETFs offer the best blend of performance, liquidity, and compliance. Digital gold is user-friendly and great for new investors. Mutual funds serve those seeking gold exposure with minimal intervention.
Final Word
India’s gold narrative is transforming—from heirlooms to apps, from lockers to liquid funds. The emotional connection to gold remains, but its form is becoming smarter, cleaner, and better aligned with financial goals. As digital wallets replace vault keys, India’s most cherished asset is now embracing its most dynamic generation.
Disclaimer: The views expressed in the article are by Dr. Jayatu Sen, Professor, Finance & Analytics, Great Lakes Institute of Management and are not advised by the author or Moneydaily.in. The story highlights key factors while selecting the right gold loan provider and should not be considered as investment advice by the Moneydaily.in or the Author. Moneydaily.in and the author will not be held responsible for any losses caused as a result of decisions based on the above information. Moneydaily.in advises readers to do their own research or consult a SEBI registered investment advisor before making any investment decisions.
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