Digital gold vs gold ETFs and gold funds: how they differ

Digital gold, gold ETFs and gold funds all let you own gold without a locker at home. What you own is different in each. With digital gold it is gold a provider holds for you. With a gold ETF it is a unit of a listed fund that holds gold. With a gold fund it is a unit of a mutual fund that holds that ETF. That difference changes your protection, how you buy and sell, what it costs and when your gain counts as long-term.

How do digital gold, gold ETFs and gold funds differ?

Digital gold is gold a provider keeps in its vault for you. A gold ETF is a SEBI-regulated fund whose units trade on the stock exchange. A gold fund of funds (FoF) is a mutual fund that holds at least 95% of its money in a gold ETF. An ETF, or exchange traded fund, is a fund you buy and sell on the stock exchange like a share.

A few terms from the table. NAV is the price of one unit of a fund. A demat account holds shares and ETF units electronically. The expense ratio is a yearly fee, as a share of your money. The riskometer is the risk label SEBI makes every fund show. GST is a tax on goods and services.

A short-term gain on any of the three is taxed at your slab rate. The slab rate is the income-tax rate that applies to your total income. Sovereign gold bonds and electronic gold receipts are other ways to own gold; ways to invest in gold sets all of them out. Jewellery is a different thing again, since it carries making charges, and digital gold versus physical gold covers that.

What do you actually own in each?

In digital gold you own grams of gold held for you. In an ETF or a fund you own units, which are a share in a pool of money.

SafeGold says Brink's stores its gold, insured, and that a trustee checks the balances with the custodian each quarter. A custodian is the firm that keeps the gold safe. MMTC-PAMP says it keeps gold in "bank-grade, fully secured and insured lockers" at its own facility. Is digital gold safe? has the detail.

A gold ETF is built differently. SEBI's rules say it holds at least 95% in gold and gold-related instruments, and its aim is to follow domestic gold prices, subject to tracking error. That is the gap between the fund's return and the gold price. The metal is held by a SEBI-registered custodian in standard bars of set purity, and the fund's auditors check it physically every six months.

A gold fund of funds holds at least 95% in its ETF. It values those ETF units at their closing price on the stock exchange. So its NAV can differ slightly from the gold price. A regular plan is the version you buy through a distributor, a registered intermediary that helps you buy and manage funds.

Who regulates them?

Digital gold is not regulated by SEBI. In November 2025 SEBI said such products are "neither notified as securities nor regulated as commodity derivatives" and that its investor-protection mechanisms do not apply to them. Gold ETFs and gold mutual funds are SEBI-regulated.

SEBI also said such products may expose investors to counterparty and operational risks. Counterparty risk means the firm on the other side may not do what it promised. Operational risk means something may go wrong in how it runs the business.

The riskometer has six levels from Low to Very High. Gold ETFs read High on the riskometer on 31 August 2026. A fund of funds takes the level of the ETF it holds. Digital gold carries no riskometer, because it is not a SEBI product.

How do you buy and sell each one?

Digital gold is bought in an app at the price the provider quotes, and the other two follow the rules of a fund.

You buy and sell ETF units on the stock exchange during market hours, like a share, which needs a demat account and a broker. Buying from or selling to the fund house directly is allowed only above ₹25 crore.

A gold fund of funds works like any mutual fund. You buy units at the NAV, and under SEBI's rules the redemption money reaches you within 3 working days.

On Koshex, digital gold starts at ₹100, you can sell any time, and physical delivery is available. Gold funds are offered as regular plans; Koshex holds ARN-154632.

Can a gold ETF or gold fund back a loan? Not from a bank, under RBI's rules: bank loans against securities exclude gold and silver ETFs by name, and gold funds of funds do not qualify because they hold ETF units rather than shares or bonds. Can digital gold be used for loans? covers the digital gold side.

What does each cost?

Funds charge a yearly expense ratio, taken out of the fund's value. Digital gold's costs sit in the gap between the buy and sell price, called the spread, and in storage fees after any free period.

SEBI caps the total cost of a gold fund of funds, including the ETF it holds, at 0.90% a year. In their factsheets for 31 August 2026, HDFC's gold ETF fund of funds shows a base expense ratio (the yearly fee figure the factsheet shows) of 0.47% for its regular plan, and Tata's shows 0.57%. On ₹60,000 held for a year, that is ₹282 at 0.47%, ₹342 at 0.57% and at most ₹540 at the full 0.90%.

GST on buying gold bars, coins or jewellery is 3%. SafeGold says GST is added to the buy price but not levied on any sell transaction. It adds that payment gateway, trustee, insurance and custodian fees also contribute to the difference between buy and sell price. MMTC-PAMP says its spread is due to 3% GST and other handling and processing charges.

At 3%, as both providers describe it, that is ₹1,800 of GST added to the buy price on ₹60,000 of gold. With both providers, the sell price is below the buy price, and the price is shown before you confirm. Selling digital gold step by step shows what the gap does to a sale. Storage charges after a free period are set in each provider's terms; how long you can hold digital gold covers them.

All three follow the gold price, less these costs and the tax below.

How is each one taxed?

A gain is taxed at 12.5% once it is long-term and at your slab rate before that. The line is more than 12 months for a gold ETF, and more than 24 months for a gold fund and for digital gold. A gain on units sold on or before the line is short-term, and a gain after it is long-term.

An ETF unit is listed, so a gain on one held 12 months or less is short-term. An unlisted fund unit is short-term if held 24 months or less. Digital gold is not a listed security, so it is short-term if held 24 months or less as well. Cess, a 4% charge on the tax itself, is added.

For gold ETFs and gold funds of funds the purchase date does not matter. So the 12-month and 24-month lines above apply whenever the units were bought.

Here is an illustration. A 34-year-old puts ₹60,000 from an annual bonus into gold. The gain is ₹9,500 in each case and the sale comes after 18 months. Income, including the gain, stays within the 20% band of the default regime, ₹16,00,001 to ₹20,00,000, with no surcharge.

• Gold ETF: long-term, so ₹1,187.50 at 12.5% plus 4% cess, which is ₹1,235.
• Gold fund of funds: short-term, so ₹1,900 at 20% plus cess, which is ₹1,976.
• Digital gold: short-term as well, so the same ₹1,976.

This illustration leaves out the ₹1,800 of GST that both providers say is added to the buy price. The tax rebate for lower incomes cannot reduce tax charged at a special rate such as 12.5%. Read how to save tax on digital gold. For the fund side, ETF or fund of funds compares them in more depth.

What changes for you with each one?

What changes depends on what you want the gold to do.

• You may want coins or bars later. Digital gold can be taken as physical delivery.
• You want SEBI's protections. Gold ETFs and gold funds fall under them. Digital gold does not.
• You have no demat account. A gold fund or digital gold works without one. A gold ETF needs one, plus a broker.
• You want to invest every month. A SIP, a fixed amount invested at regular intervals, is possible in a gold fund. Gold SIP explains how.
• You may sell within a year or two. The tax line decides it. A gold ETF gain turns long-term after 12 months; the other two need more than 24.

Gold in your portfolio looks at the role gold plays. The gold funds page covers the funds of funds, and digital gold has the details of that service.