Gold investment is gaining popularity among young investors because of its liquidity and safety. Moreover, they can purchase it in smaller amounts unlike physical jewellery and have it redeemed at any time with the money instantly credited to their bank account or mobile e-wallets.
Buying digital gold is easy as all you need is a mobile phone and some payment apps. Let’s take a closer look at this investment option.
How to buy
Digital gold is a safe, convenient, and affordable way to invest. It is stored in secure and insured vaults on behalf of the investor and can be purchased through a mobile e-wallet, UPI ID or bank accounts. It is also easy to liquidate, as you can sell it anytime, anywhere.
While digital gold has several advantages over physical gold, it also comes with some risks. Unlike other financial products, digital gold does not come under the purview of a regulatory body. This can lead to a variety of problems, including fraud, identity theft, and poor management.
To avoid these risks, you should always choose a reputable and secure platform to buy digital gold. You should also make sure that your digital gold is fully insured and backed by real bullion. Additionally, you should always research the company and seek independent advice before investing in digital gold. Ultimately, the best option for you will depend on your investment goals, risk tolerance, and liquidity needs.
Taxes
While physical gold is a popular investment option, it is not without its tax implications. The metal attracts capital gains taxes on the sale of its assets, which depend on their duration. The short-term capital gains are taxed at 20% plus 4% cess while the long-term capital gains or LTCG are taxed at slab rates.
On the other hand, digital gold investments are free from these taxes. This is because they do not involve the exchange of physical gold for money and are held in insured vaults on your behalf by the seller. Moreover, the digital gold is backed by physical gold bullion and is audited regularly to ensure it stays 1:1 with the underlying asset.
Besides, investors can also invest in gold derivatives through commodity F&O trading platforms that offer a variety of options to invest. These include gold etfs, sovereign gold bonds (SGBs) and old ETFs. In such cases, a person is required to disclose their gains and losses in their income tax returns.
Liquidity
Gold has always been an important part of any portfolio. It is a store of value that can be bought and sold at any time. It can also be used as collateral for loans. It is a safe investment option that can protect against inflation. However, it is not without its risks.
Many people are now looking for new ways to invest in gold. One of the new options is digital gold. This type of gold is vault-stored and can be bought and sold on payment apps. It is also easy to use and can be accessed around the clock.
Unlike physical gold, which can only be redeemed at the bank, digital gold is instantly available for sale. The amount of gold redeemed is credited into your account at the real-time market rate. However, the maximum holding period and charges for storage can vary. MMTC-PAMP and SafeGold, for example, require that you submit your PAN if you buy more than Rs 2 lakh worth of digital gold.
Security
Digital gold currencies provide protection from hackers and other malicious actors. The underlying bullion backing digital gold is secured in vaults and is insured by the provider. This provides a level of security not available with physical investments.
While this investment option offers superior liquidity and value compared to physical gold, investors should always consider whether it is appropriate for their individual needs. The investment is not regulated by the Financial Conduct Authority and is therefore not covered by the Financial Ombudsman Service or the Financial Services Compensation Scheme.
Digital gold can be bought through payment apps like UPI or e-wallets and is stored in secure vaults on behalf of the investor. This makes it easy to access and sell when needed. It also saves storage charges and reduces the risks of theft or loss. This is a major factor behind its rising popularity among millennials and Gen Zers. It also has a low entry point and can be purchased in small units.
