5 factors to consider before investing in gold instruments

As a long-standing tradition in Indian culture, investing in gold during Akshaya Tritiya is considered very auspicious. However, purchasing gold jewellery and physical gold comes with a huge mark-up

With a 3 per cent GST paid upon purchase, added charges on making, design, and storage of gold tend to erode its value. Yet our country remains the largest consumer of gold globally with over 11 per cent of the world’s total gold owned by Indian households.

Considered to be one of the most valuable assets, gold has long been a safety net that one must incorporate into their portfolio.

It’s time to go digital!

In today’s time, if you are a smart investor, you will realize the benefits that you can enjoy by investing in gold digitally. It’s hassle-free, fairly valued, and a pure form of investment.

Although, there are various ways of investing in digital gold like sovereign gold bonds, gold mutual funds, gold ETFs, digital gold plans, and having choices is great but it does lead to confusion.

Here’s your go-to guide to investing in gold the smart way!

Sovereign Gold Bonds
These are issued by the RBI on behalf of the Government of India. It is like buying real gold but in certificate format. They are regarded as one of the most lucrative ways of investing in gold.

Sovereign gold bonds are a great option for investors looking at making a lump sum, long-term investment (lock in-5 years; maturity period 8 years) in gold with an added interest income of 2.5% per annum. It’s a cost-effective way to add gold to your portfolio and a few of the benefits are that it comes with no GST, no making charges, no risk of theft, and no insurance cost.

Gold ETFs

These are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE) like a stock of any company. Gold ETFs invest in 99.5 per cent pure gold. These are ideal for investors who are looking for short-term as well as long-term investment/trade options or are looking for an investment that offers easy liquidity. Investors can easily sell their ETF units in the stock market with no entry and exit load charges.

Gold mutual funds
These are mutual funds that directly or indirectly invest in gold. Gold mutual funds invest in the shares of gold mining and distribution companies, physical gold, and gold ETFs. Investors can start investing with just Rs 100. These are suitable for investors who want to make small investments in gold or are looking for a liquid way of investing in the same. Investors can also make regular investments in gold mutual funds by starting a SIP. What’s great for investors is that they benefit from a professional fund manager who takes the decisions to generate returns.

Digital gold plans

Digital gold plan is a convenient and cost-effective way to accumulate yellow metal. It enables you to buy, sell and accumulate pure gold in fractions anytime and anywhere. You can invest in digital gold with as little as Rs 1! It is ideal for investors who want the dual benefits of investing in gold as well as the option to easily take physical delivery at a later time. Investors can put in small amounts however, as digital gold does not come under the purview of any financial regulator, one needs to select the platform carefully.

Tax implications on gold
The tax implications mostly remain the same across instruments. If gold is held for less than 36 months, the tax is as per slab rates.

Whereas, if gold is held for more than 36 months, a flat 20 per cent tax rate is charged with indexation benefits along with a surcharge (if applicable) and a cess of 4 per cent.

Only in the case of SGBs, the above-mentioned sustain if the instrument is sold after 5 years but before 8 years. Otherwise, the interest income is completely taxed while the corpus received upon maturity is tax exempted.

Gold is a safety net that you must incorporate into your portfolio. And women have always expressed a keen interest in buying gold and it’s one of the preferred investment options for them across metros and small towns.

They have a strong emotional and secure relationship with gold. Earlier buying physical gold was considered an investment but as times are changing, with an increased level of financial literacy, women are moving towards investing in gold the smart way!