What is digital gold? Meaning, features, and how it works

Gold has traditionally been used in India for jewellery purchases and savings. However, physical ownership involves purity verification, storage considerations, insurance arrangements, and resale spreads. The term digital gold refers to gold purchased online in fractional quantities (measured in grams), where the platform generally states that equivalent physical gold is held with a vaulting partner on behalf of the buyer.

Digital gold may offer operational convenience, but investors should note that the Securities and Exchange Board of India (SEBI) has clarified that digital gold or e-gold offerings available on certain online platforms operate outside its regulatory purview.

This article explains the meaning, features, working mechanism, costs, risks, taxation basics, and comparisons with other gold exposure routes in India.

Table of contents

• What is digital gold?
• How does digital gold work?
• Benefits of digital gold
• Fees & charges associated with digital gold
• Digital gold vs other gold options
• Taxation on digital gold
• Advantages and disadvantages of investing in digital gold
• Different ways of investing in gold
• Mutual funds as an alternative to digital gold
• Invest in gold and silver through Bajaj Finserv Multi Asset Allocation Fund

What is digital gold?

Digital gold is a service offered by certain mobile applications, websites, payment platforms, and jewellery-linked providers that enables individuals to purchase gold online in small rupee amounts or fractional grams without taking immediate physical delivery. The platforms generally state that it arranges the purchase of an equivalent quantity of physical bullion and stores it in insured vaults through a bullion or vaulting partner. Investors view their holdings digitally through an account interface. Some platforms allow purchases starting from relatively small amounts, which may support gradual accumulation over time.

The digital gold meaning is therefore closer to an online buy-and-store arrangement facilitated by private entities rather than a listed financial instrument. SEBI has stated that such products are neither notified as securities nor regulated as commodity derivatives and therefore operate outside its regulatory framework. Investor ownership rights, redemption terms, and grievance processes depend primarily on contractual arrangements with the platform provider.

How does digital gold work?

Digital gold platforms typically display live buy and sell quotes determined by the provider. After payment is completed, the investor’s balance is credited in grams of gold. The provider generally states that it purchases or allocates equivalent bullion and stores it in vaults, while the investor monitors holdings through the platform interface.

Exit typically happens in two ways:

• Selling the gold back to the platform at its quoted sell price
• Redeeming accumulated gold into coins or bars where physical delivery is offered, subject to minimum quantity requirements and delivery or fabrication charges

Pricing, spreads, redemption limits, and operational procedures vary across platforms and remain central considerations for investors.

Benefits of digital gold

Commonly discussed features of digital gold include:

• Relatively low starting purchase amounts on many platforms
• Holdings displayed in grams, which may simplify tracking
• Absence of personal storage arrangements during the holding period
• Online sell-back facilities and, in some cases, physical redemption options

These features relate primarily to accessibility and convenience. They do not reduce gold price volatility or platform-related operational and counterparty risks.

Fees & charges associated with digital gold

Digital gold prices are generally based on underlying spot rates plus provider spread rather than through exchange-based price discovery. The purchase price may include Goods and Services Tax (GST) along with a provider margin.

Key cost elements may include:

• GST applicable at the time of purchase
• Buy–sell spreads, which may widen during volatile market conditions
• Vaulting or storage costs, which may be embedded in pricing or charged after an initial period
• Minting, fabrication, and delivery charges if physical redemption is requested

Since pricing structures differ across providers, investors may review platform disclosures carefully before proceeding with a purchase.

Digital gold vs other gold options

Digital gold sits between physical gold ownership and market-traded gold exposure routes. SEBI has noted that many digital gold products offered through online platforms fall outside its regulatory purview.

Regulated gold exposure in India includes:

• Gold exchange traded funds (Gold ETFs) offered by mutual funds and traded on stock exchanges
• Gold mutual funds that typically invest in Gold ETFs
• Electronic gold receipts (EGRs) traded on recognised stock exchanges
• Exchange-traded commodity derivatives
• Sovereign Gold Bonds (SGBs) issued by the Government of India (via RBI) and linked to gold prices, with interest payments. These are currently available in the secondary market on stock exchanges; fresh issuances depend on Government/RBI notifications.

Compared with coins or bars, digital gold reduces handling requirements but introduces dependence on the platform’s operational processes and contractual safeguards.

Compared with a gold ETF, digital gold purchases typically do not require a demat account. Gold ETFs, however, operate within a defined regulatory and disclosure framework. A gold mutual fund invests primarily in Gold ETFs and may be purchased through mutual fund platforms without exchange trading.

Taxation on digital gold

Digital gold is generally taxed in a manner similar to physical gold in India.

Under current tax rules:

• Gains arising from gold held for more than 24 months are treated as long-term capital gains and taxed at 12.5% without indexation
• Holdings of 24 months or less are treated as short-term capital gains and taxed at the investor’s applicable income-tax slab rate
• GST applies at the time of purchase

Gold ETFs and gold mutual funds follow separate taxation rules under mutual fund regulations.

Advantages and disadvantages of investing in digital gold

Digital gold may offer operational simplicity but may not suit every investor profile.

Advantages

• Fractional purchasing and digitised record-keeping
• Convenience of online transactions
• Potential conversion into physical gold on certain platforms

Disadvantages

• Buy–sell spreads and taxes may increase costs, particularly for shorter holding periods
• Dependence on platform processes, custody arrangements, and contractual safeguards
• Operational and counterparty risks if platform systems or arrangements fail
• SEBI has cautioned that many digital gold offerings operate outside its regulatory purview, and securities-market investor protection mechanisms are not available

Different ways of investing in gold

Gold exposure in India is commonly taken through multiple routes:

• Physical gold such as jewellery, coins, or bars
• Digital gold offered through private platforms
• SEBI-regulated exchange products

Gold ETF units trade on stock exchanges, while gold mutual funds invest primarily in Gold ETFs and may be accessed without a demat account. Sovereign Gold Bonds (SGBs) are government securities linked to gold prices, though fresh issuance depends on government notifications.

Each route involves different liquidity features, costs, regulatory structures, and risk considerations.

Mutual funds as an alternative to digital gold

Investors who prefer regulated market products may evaluate mutual fund-based gold exposure. A gold ETF is offered by mutual funds and trades on stock exchanges, generally requiring a demat account. A gold mutual fund typically invests in Gold ETFs and is purchased at end-of-day NAV through mutual fund platforms.

For disciplined allocation, an investor may consider an SIP in a gold-oriented mutual fund scheme and use an SIP calculator to plan contributions. This approach may suit investors looking to include gold exposure within a SEBI-regulated mutual fund structure.

Invest in gold and silver through Bajaj Finserv Multi Asset Allocation Fund

Investors seeking exposure to precious metals through a regulated mutual fund structure may consider diversified multi-asset strategies. For example, the Bajaj Finserv Multi Asset Allocation Fund includes allocation to gold. Apart from gold, the fund also invests in silver for additional diversification and growth potential.

This approach seeks to provide investors with regulated access to precious metals within a diversified portfolio structure, while maintaining the broader objective of risk management and asset allocation discipline.

For more information about the scheme and to read statutory details, click here.

Conclusion

Digital gold represents an online method of purchasing gold in small quantities through platform-based arrangements where the provider states that equivalent bullion is stored through designated vaulting partners. It offers accessibility and fractional ownership through digital interfaces.

Digital gold is one among several gold exposure routes available in India. Investors may evaluate regulatory structure, costs, liquidity, and risk characteristics across physical gold, gold ETFs, gold mutual funds, and Sovereign Gold Bonds before making decisions aligned with their financial goals and risk tolerance. Investors are advised to consult a financial advisor before making investment decisions.

FAQs

Where can you buy digital gold in India?

Digital gold has been offered through certain fintech applications, payment platforms, and jewellery-linked providers via partnerships with bullion suppliers and vaulting entities.

Is it safe to buy gold online?

Investors may review platform disclosures, custody arrangements, audit practices, pricing transparency, and grievance redressal mechanisms. SEBI has cautioned that digital gold offerings operate outside its regulatory framework.

How is digital gold different from gold ETFs?

Digital gold operates through platform-based arrangements with provider-determined pricing and contractual terms. Gold ETFs are SEBI-regulated mutual fund products traded on stock exchanges with defined disclosure, valuation, and investor protection frameworks.

Is digital gold real gold?

Providers generally state that investor balances are backed by equivalent physical gold stored in vaults. Legal ownership rights and claims depend on contractual arrangements with the provider, and physical possession typically arises only upon redemption.

Can I take delivery of digital gold?

Many platforms allow redemption into coins or bars above specified minimum quantities. Fabrication, minting, and delivery charges usually apply, and redemption terms differ across providers.

Is digital gold regulated?

SEBI has clarified that digital gold or e-gold products offered on online platforms are outside its regulatory purview and are not regulated as securities or commodity derivatives.

Is digital gold 24K / 999?

Digital gold is commonly marketed as 24K bullion with stated purity levels such as 999 or 999.9. Purity certification, invoices, and provider disclosures may be reviewed carefully.

Can we sell digital gold?

Most platforms provide an online sell-back facility at their quoted sell price. The realised proceeds depend on prevailing gold prices, platform spreads, and applicable charges at the time of sale.