What is the Difference Between

E-Gold & Gold ETF’s?

Gold Exchange Traded Funds (ETF)

E-Gold

Based on the price of gold; invests
in gold bullion of 99.5% purity
on the investor’s behalf. The
investor doesn’t directly
buy gold but instead
buys or sells units
of the gold
ETF.

An electronic way to buy
gold in a dematerialised
format, which can be
easily converted
to physical
gold.

E-GOLD

ETF

E-gold investors track the prices of gold directly.

Gold ETF investors track the Net Asset Value (NAV) of the ETF which is variable in nature.

For E-gold, you should hold your investment for at least 3 years to qualify for long-term capital gains tax of 20% (after indexation)

For gold ETFs, the holding period to be considered for long-term capital gains tax of 20% (after indexation) is just one year.

Considered to be better for long term investing.

Considered to be better for short term investing.

When it comes to E-gold, even a minimal quantity of 8 gm can be converted into physical gold.

At least 1 kg needs to be accumulated in case you choose to convert it to physical gold.

E-gold is traded in NSEL (National Spot Exchange Limited allows investment in gold in smaller denominations that can be held in Demat form) from 10 am to 11:30pm, hence providing more liquidity.

Gold ETFs can be traded only from 9:30 am till 3:30 pm.

Although it is the cheapest form of investment, in terms of taxation, e-gold offers only LTCG benefit, provided it is held for three years or more.

If units of gold ETFs are sold after a year of purchase, a tax of 20% is levied. If sold within a year of purchase, any gains you get are added to your income and taxed according to the tax slab you fall under.

A Demat account is essential if you want to trade in E-gold.

Trading in gold ETFs doesn’t require a Demat account.

E-gold is seen as an investment that usually gives better returns as no recurring costs are involved.

Since gold ETFs have a lot of additional costs (such as management and advisory fees, marketing and distribution expenses, custodian charges) the returns are comparatively less.

Wealth tax is applicable on E-gold

No VAT, wealth tax, or securities transaction tax is applicable on gold ETFs.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.