How Can I Save Tax On Digital Gold?

How Can I Save Tax On Digital Gold?

Digital Gold is becoming one of the favorite investment instruments for millennials and Generation Z. Gone are the days when people bought physical gold; these days people invest in digital gold, which is one of the most convenient and safe ways to invest in gold.

In this article, we will talk about digital gold, how you can invest in them, and how you can save tax on them.

Indians’ love for gold is widely known. According to a 2022 survey by Axis My India, a consumer data intelligence company, a total of 65% of Indians invest a part of their income in one form or another and gold has emerged as a popular choice of investment.

The survey showed that 53% of the Indians preferred gold as an investment tool, 35% of the population showed awareness towards digital gold and 10% of people said that they have already invested in digital gold.

Here’s another surprising thing the survey showed: Metro cities love digital gold to the point where gold is the highest investment option (65% in digital gold), followed by fixed deposits (44%), and mutual funds (37%). The survey also showed that gold as an investment instrument is higher among females (65%) than males (41%). 

Let’s start from the basics.

What Is Digital Gold, Anyway?

Digital Gold is just like regular gold that can be bought online. When you buy digital gold, the seller will store an equivalent quantity of physical gold in insured vaults on your behalf.

Once you make the payment, you will get an invoice and the said quantity will reflect under the vault balance in your account with the service provider.

You can sell this gold at any time at live market rates, in either rupees or grams. You can also get the gold in physical forms like coins or ornaments, adjusted for any making charges and packaging costs. 

When you compare physical gold with digital gold, the former comes with many non-refundable fees like making charges, storage costs, security risks, etc.

On the other hand, digital gold is more functional and considered a smart investment option.

Who Is Offering Digital Gold In India?

Some companies in India offer digital gold, including MMTC-PAMP India Pvt. Ltd, which is a joint venture between state-run MMTC Ltd and Swiss firm MKS PAMP. MMTC-PAMP India Pvt. Ltd is internationally recognized as an industry leader for bringing global standards of excellence to the Indian precious metals industry.

They are the only LBMA (London Bullion Market Association) accredited gold refinery in India and their gold is accepted across global commodity exchanges and central banks.

Where To Buy Digital Gold In India?

MMTC-PAMP has partnered with Koshex to offer services to users to buy digital gold directly from them via Koshex’s easy and convenient platform.

Koshex is a one-stop solution for every Indian investor who is looking to invest in digital gold. You can buy, gift, and sell digital gold from one place. You can also track and manage your investment in digital gold through Koshex. 

How Is Digital Gold Taxed In India?

Digital gold is taxed at the same rate as physical gold and the tax amount depends on the holding period. 

If you sell your digital gold within three years from the date of purchase, any proceeds from the sale will be considered Short-Term Capital Gains (STCG).

This gain will be added to your income and taxed according to the tax slab you fall in. For example, if you fall under the 30% slab, the gain amount (i.e. sale price minus the purchase cost) will be taxed at 30%.

If you sell your digital gold after three years or more from the date of purchase, the proceeds from the sale will be classified as Long-Term Capital Gains (LTCG).

Long-term capital gains from the sale of digital gold are taxed at 20%, with applicable surcharge and education cess with indexation benefit. Indexation allows taxpayers to recalculate the investment’s purchase price after adjusting for inflation.

What Are The Benefits Of Digital Gold?      

An investment in digital gold investment provides many advantages. Here are a few such digital gold benefits: 

Convenient – Digital gold can be bought through Koshex in just a couple of clicks. There is no need for you to go to the store or even leave the house. At this age of the pandemic, it is safe to buy digital gold, as it doesn’t require you to step out of the house.

On the other hand, it is just as hassle-free when you want to sell it. The transactions will happen at the prevailing gold prices, but some institutions might levy some charges. 

No Restrictions – You can put any amount of your savings to invest in digital gold. It doesn’t matter if you are in the early stages of your career and do not have enough savings to make a considerable investment.

You can start investing in digital gold with just ₹100, unlike physical gold, which is more expensive to buy.

Purity Guaranteed – When you buy physical gold, there is a slight hint of worry about whether you are buying authentic 24K gold.

However, when you buy digital gold, the gold the companies buy on your behalf is pure as it is their responsibility to make sure of the gold’s purity.

Easier Conversion – It is easy to convert digital gold into physical gold. Instead of selling the gold, you can convert it into coins or jewelry. The physical gold can then be delivered to you directly. 

Protection – When you hold physical gold in your house, there are risks of robbery. However, with digital gold, it is the company’s responsibility to keep it protected.

You can log in and access them anytime you want through your phone.  

No Maintenance Required – Unlike physical gold, digital gold doesn’t need any maintenance on your part and you can easily keep them in a safe place for several years. 

Use As Collateral – One of the greatest digital gold benefits is that it serves as an ideal form of security that you can use for availing of online loans. It counts as an asset and can be pledged as collateral for credit.

Diversification – If you are looking to balance the risk factor in your overall investment portfolio, digital gold provides the perfect investment mode for you to diversify. When you have allocated a lot of money into equity mutual funds or any other risky assets, it is a good idea to include digital gold to reduce the risk and increase the gains.

Gifting Digital Gold To Your Loved Ones

With Koshex, you can gift digital gold to your loved ones. You don’t have to worry about the making charges and your loved ones don’t have to worry about the safety and purity of the gold.

According to historical data, the value of gold tends to go up in time. So, the ₹5000 digital gold that you gift today might be worth ₹1,50,00 in the future.

You can also invest in a ‘Gold Savings Plan’ and through this, you can set up a monthly or weekly plan to buy gold.

You can enter the investment amount, frequency, tenure, and start date. The amount will be deducted automatically from your bank account and digital gold will be bought for that amount. 

In The End…

Digital Gold is a convenient way to buy gold as you can do it from the comfort of your home. You don’t need thousands of rupees to buy digital gold.

All you need is ₹100 to start investing in digital gold, making it an affordable investment option for many investors. You can also gift digital gold to your loved ones. 

We hope this article helped you understand more about what digital gold is, how you can buy digital gold, how it is taxed, and what are the benefits of investing in digital gold.

If you are looking to invest in digital gold, gift gold to the special people in your life, and start a gold savings plan, create a free account with Koshex in less than a minute. 

Want to learn more about personal finance and other investment instruments, like Mutual Funds, Smart Deposits, and Fixed Deposits? Head over to our Blogs section where we have written about several topics on how you can manage your money better and invest efficiently. 

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