Gold Jewellery vs Digital Gold: Which Option Has Higher Taxes? Here's What's More Profitable to Buy on Dhanteras

As Dhanteras approaches, Indians are gearing up to buy gold — a traditional symbol of prosperity and wealth. However, with gold prices in Delhi crossing ₹1.3 lakh per 10 grams for the first time, buyers are now more cautious about taxes and charges before investing. Whether you prefer physical jewellery or digital gold, understanding the tax implications can help you make a smarter decision this festive season.

1. GST on Gold Purchases

Here’s a breakdown of Goods and Services Tax (GST) on various forms of gold investment:

Investment Type GST on Purchase

Physical Gold (Jewellery, Coins, Bars)	3% GST on gold value + 5% GST on making charges
Sovereign Gold Bonds (SGBs)	No GST applicable
Gold ETFs	No GST on transactions, 18% GST on brokerage/transaction fees
Gold Mutual Funds	No GST during investment
Digital Gold	3% GST on gold value

2. Income Tax on Gold Investments

Physical Gold:
When buying physical gold such as jewellery, coins, or bars, you must pay 3% GST and 5–20% making charges (plus 5% GST on making charges).

• If sold within 36 months: The profit is added to your income and taxed as per your income tax slab.

• If sold after 36 months: It qualifies for long-term capital gains (LTCG) with 20% tax after indexation.

Digital Gold:
Digital gold can be purchased through apps like Paytm or PhonePe with just ₹1. It incurs a 3% GST on purchase.

• If sold within 36 months: Short-term capital gains tax applies as per your income tax slab.

• If sold after 36 months: You pay 20% LTCG with indexation benefits.
  Additionally, digital gold can be converted into physical gold if desired.

Sovereign Gold Bonds (SGBs):
SGBs are government-backed and come with zero GST.

• If redeemed after 8 years (maturity): Capital gains are completely tax-free.

• If sold before 3 years: The profit is taxed as per your income tax slab.

• If sold after 3 years: You pay 20% LTCG with indexation.
  Investors also earn a 2.5% annual interest, which is taxable under income tax laws.

Gold ETFs (Exchange Traded Funds):
While there is no direct GST on ETF transactions, 18% GST applies on brokerage or transaction fees.
From April 1, 2023, gains from Gold ETFs are taxed as per your income tax slab rate, removing the earlier LTCG benefit.

Gold Mutual Funds:
Investing in gold mutual funds attracts no GST, but profits are taxed according to your income tax bracket under the new rules effective from April 2023.

Which Is the Better Option This Dhanteras?

• For low-tax and safe investment: Sovereign Gold Bonds (SGBs) are the best choice, as they offer tax-free redemption and annual interest.

• For convenience and flexibility: Digital Gold is easy to buy and sell online but comes with GST and capital gains tax.

• For traditional value and personal use: Gold Jewellery is ideal but involves GST, making charges, and storage concerns.

Bottom Line:
If your goal is investment rather than adornment, SGBs and Digital Gold are smarter and more tax-efficient options this Dhanteras.