Investing in gold during the auspicious occasions of Dhanteras and Diwali is age-old tradition in India. People mostly buy gold coins and/or gold jewelleries on these occasions.
Although physical gold provides the opportunity of look and feel and women can become happy by wearing gold jewelleries, keeping gold safe at home is a big security issue.
Due to involvement in making charges and costs of hiring lockers and paying insurance premium for safety investments in physical gold are becoming less popular.
Dr. Suresh Surana, Founder, RSM India describes the different alternatives for investing in gold this Diwali –
Investing in Physical Gold
Buying physical gold is the most traditional form of investment in India. From the tax perspective, physical gold is considered as Capital Asset and accordingly the investor would be subjected to capital gains on sale of such gold.
Investing in Digital Gold
This is one of the upcoming investment avenues for investment in gold. It is similar to investing in the regular gold, which can be purchased online wherein the invested gold is stored in insured vaults by the seller on behalf of the customer. The minimum investment size in Digital Gold is as low as Re 1. However, the security of such investment needs to be factored considering that the investor does not have physical access to such gold investment.
Investing in Sovereign Gold Bonds (SGBs)
There is another alternative to holding physical gold i.e. by way of investing in SGBs. Sovereign Gold Bonds Scheme is government securities denominated in grams of gold and can be substitutes for holding physical gold. The Bond is issued by the Reserve Bank of India on behalf of the Government of India. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. Considering the government sovereignty enjoyed by SGBs, the capital investor is highly secure.