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Best ways to Buy Gold in India
We can invest in Gold in India as e-Gold, Gold Coin, Gold jewelery, buying the shares of companies related to Gold from the Stock markets, Gold futures, Gold bullion. Which is the best investment in Gold? This is the question asked by many Indians who want to invest in Gold in India. Go through the table below to find out the answer for the question. Each category of investment in Gold in India has their own merits and de merits. In one attributes If Gold coin fares better, then in another Gold ETF or e-Gold. All in all e-Gold and Gold ETF are the best investment in Gold in India according to me. Then Gold coin followed by Gold Jewelery. Other investments like investing gold related stocks in stock market is not considered because it is a riskier mode of investing in Gold in India.
Comparison of Gold Ornaments, Gold ETF, Gold Coin, E-Gold
| Attributes | Gold Ornaments | Gold ETF | Gold Coin | e-Gold |
| Purity of the Gold | 9 Carat to 24 Carat | 995.0% (24 carat) | 999.9% (24 carat) | 995.0% |
| Impurity Risks | Possible | No | No | No |
| Cost of Purchase | Market price of the Gold on the date of purchase & Making charges which varies from 2% to as high as 15% depending upon the works gone into making the jewelry. | 1)Market price of the Gold. 2)Brokerage charge of 0.05% to 1 %depending upon the Broker. | 1)Market price of the Gold | 1) Market price of the Gold |
| Storing charges | Almost nil If kept in bank lockers, locker fee should be paid which ranges from Rs.100 to Rs.1000. | 1)Annual maintenance charges. Rs.100 to Rs.900 2)Annual recurring expense charged by ETF manager. 0.25% to 1% of the total value of investing. | Locker charges which may range from Rs.100 to Rs.1000 depending upon the Bank | Annual maintenance charges which range from Rs.200 to 500 |
| Sources of Purchase | From Jewelers from all over the country | From the stock exchanges like NSE and BSE | 1.) Banks 2.) Post office 3.) Jewelers 4.) Non Banking financial agencies | From the trading platform run by NSEL |
| How to buy | From jewelry shops from all over the Country | Open a Demat and Trading account with Brokers and start buying | Carry Pan card for purchase above Rs.50000. Approach any of the above sources | Open a demat account with brokers approved by NSEL Then logging into the trading platform any buy as you like. |
| Demat account | No | Yes | No | Yes |
| Units of Purchase | Gm | 1 gm. Except in Quantum ETF which starts from 0.5gm. | 0.5gm, 1gm, 2gm, 4gm,8gm, 10gm, 50gm, 100gm and even 1kg are available. | 1 unit which is equal to 1gm. |
| Taxes payable on buying selling | VAT+ Sales tax | No security transaction tax. Brokerage and other charge just like you pay for equity is applicable. | VAT @ 1% for Gold Coin in India. | 1) Brokerages range start from 0.25% 2) Transaction charge limited to Rs.1/gm |
| How to sell & Where to sell | You can sell it to any Jewelers | You can sell it at the Exchanges. | Hard to sell Bankers won't take back Gold coin. You can sell it to Jewellers | Sell the units in the trading platform run by the NSEL. You can convert e-Gold to physical Gold. |
| Return on Selling | If the ornaments are of 916% or Hallmarked, then Market price on that day. You will lose the making charges that you paid at the time purchase | Market price of the Gold on that particular day. Provided the ETF that you hold has enough liquidity in the Exchanges. In a situation of scarce volume you have to reduce your price of selling. | Market price of the Gold You have to forgo the premium charged by the bank at the time of purchase. | Market price of the Gold on that day If you are converting it to physical Gold,, then you have to fork out 1%VAT and 1% as Making charges of Gold coin. |
| Annual Charges | Locker charges Rs.100 to Rs.5000 depending on the size of the Locker | 1% to 2% depending on the company | Locker charges | Annual maintainance charges which range from Rs.200 to 500 |
| Fear of theft | High, if no lockers are available | No. Security is taken care by the Fund | High, if not stored in Lockers | Nil. |
| Liquidity | High, You can even pledge your ornaments to banks and financiers | Moderate. Depends on the volume traded in exchange for the particular ETF | Low | High. Volume is picking up in the NSEL trading platform. |
| Wealth tax | yes | No | yes | yes |
| Short term capital gain tax | First 3 years | Before One year. | First 3 years | First 3 years |
| Long term capital gain tax | After 3 years | After One year | After 3 years | After 3 years |
| As an Investment | No | Yes | Yes | Yes |
| Charges to Investment ratio | High | Low | High | Lowest |
| If the value of Gold stays static for 3 years | Investment decreased in value by making charges and locker charges if any | Investment decreased in value by annual maintenance charges and brokerages and Annual recurring expenses charged by the ETF manager | Investment decreased in Value by the Locker charges and premium charged by the Bank from where you purchased the Gold coin | Investment decreased in Value by the annual maintainance cost and brokerages |
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