Gold continues to hold its place as a trusted ‘safe-haven’ asset for Indian households, especially during weddings and festivals. But the way Indians are buying gold is changing rapidly. Instead of purchasing jewellery or coins and storing them in lockers, a growing number of investors are now turning to digital platforms, buying gold online in small amounts – sometimes starting as low as Rs 1.

This shift has made digital gold one of the fastest-growing investment trends in recent years. Industry data shows transactions have jumped from around 21 million to nearly 1 billion in just about 1.5 years, with digital gold now accounting for roughly 10 per cent of total gold investments.

However, this convenience comes with a critical caveat. Digital gold still lies outside the regulatory framework of the Securities and Exchange Board of India and the Reserve Bank of India, raising important concerns around investor protection, transparency and long-term safety. Here is a detailed breakdown of how digital gold works, what it costs, the risks involved and how it compares with physical gold.

What is digital gold?

Digital gold is not a virtual or synthetic asset – it represents real, physical gold that is purchased and stored on your behalf.

When you buy digital gold, the platform allocates an equivalent quantity of 24-carat, 999.9 purity gold and stores it in insured vaults. While you do not physically hold the gold, you remain its owner.

Most platforms allow investors to buy or sell gold instantly through apps or websites. You also have the option to convert your holdings into physical gold – typically coins or bars – by paying making and delivery charges.

The biggest appeal of digital gold lies in its accessibility and flexibility. Investors no longer need large sums to start. With entry points as low as Rs 1 or Rs 10, it allows gradual accumulation – similar to a SIP-style approach. Transactions can be done anytime, without visiting a jeweller or worrying about storage. This ease, combined with real-time pricing and instant liquidity, has made digital gold particularly popular among younger investors and those exploring gold as an asset class for the first time.

Digital gold offers a set of features that differentiate it from traditional gold buying:

• Minimum investment: Starts from as low as Rs 1–Rs 10
• Purity: Typically 24-carat, 999.9 purity gold
• Liquidity: Buy or sell anytime online
• Storage: Held in insured vaults by the provider
• Conversion: Option to take physical delivery

However, it is important to note that digital gold does not generate any interest or fixed return. Your gains depend entirely on gold price movements.

While digital gold eliminates making charges at the time of purchase, it is not cost-free.

• GST: 3 per cent is charged on every purchase
• Platform charges: May include spreads or small fees
• Delivery costs: Applicable when converting to physical gold

Taxation on digital gold mirrors that of physical gold and depends on how long you hold the investment.

• Less than 24 months: Gains are taxed as per your income slab
• More than 24 months: Gains taxed at 12.5 per cent (plus cess)

This makes the holding period a critical factor in determining net returns, particularly for those planning to exit early.

Despite its rapid growth, digital gold operates in a regulatory grey zone.

It is not regulated by SEBI or RBI, which means there is:

• No formal oversight of platforms
• Limited clarity on grievance redressal
• Dependence on the credibility of the provider

Experts have consistently advised investors to prefer regulated alternatives such as gold ETFs or Sovereign Gold Bonds, especially for larger investments.

The comparison between digital and physical gold ultimately comes down to priorities.

• Convenience and instant transactions
• No storage or theft concerns
• Ability to invest in small amounts

• Tangible ownership
• Established legal recourse in case of disputes
• Greater acceptance in resale markets

At the same time, physical gold has drawbacks such as storage costs, purity concerns and reduced returns in jewellery due to making charges.

Digital gold may appear simple, but there are underlying risks:

• Lack of regulatory protection
• No passive income or interest
• Dependence on platform transparency
• Possible storage limits or additional fees over time

Physical gold, too, carries risks – including theft, impurity and deductions during resale.

This article is for informational purposes only and should not be considered investment advice. Investors should assess their financial goals, risk appetite and consult a qualified financial adviser before making any investment decisions.