The shine in the yellow metal has been dazzling over the past few years. In FY25 alone, gold prices shot up over 31 per cent, outpacing most other asset classes.
A combination of volatile equities, US trade tariff concerns, uncertain global economic outlook and continuing central bank purchases have kept the attraction around gold going in recent years.
For investors, multiple known avenues of taking exposure to the yellow metal are available – digital gold, physical coins and jewellery and exchange traded funds/mutual funds. We are excluding sovereign gold bonds as they are no longer issued.
While the ways to buy gold are known, it is important for investors to understand the many underlying charges that are involved. And these charges vary depending on the option taken.
These additional costs/charges/taxes can be quite significant in some cases and eat into your returns by hiking the cost of acquisition.
Digital gold, physical costs
Many jewellers (Tanishq, Jos Allukas, GRT, Kalyan etc) and online apps allow you to buy gold in the digital format. These players act as a front for transaction, while MMTC-PAMP is a key enabling platform for buying and selling gold. You can also buy directly from MMTC-PAMP. Many online apps, jewellers and portals such as Google Pay, Tanishq, PhonePe and Axis Bank, among a few others, also work with Safegold. You can also buy and sell from Safegold directly. MMTC-PAMP and Safegold ensure the making of coins/bars when required, storage, insurance and delivery. There are a few other players as well in the space.
Now, when you buy gold from any of the apps or directly from the platforms, you will have to pay a 3 per cent GST on the amount spent to buy the gold. So, for example, if you buy 1 gm of 24-karat gold in the digital mode for ₹9,100, there would be 3 per cent GST on it, taking the total price to ₹9,373.
There would also be an additional 2-3 per cent difference in the buying and selling price of digital gold.
This difference arises due to a variety of charges. Custodian charges, which kick in usually after the fifth year of storing the gold, is usually around 0.3-0.5 per cent a year.
Then there are charges related to insurance and storage. So, all these result in a price differential while selling, as mentioned earlier.
In case you wish to take delivery of the physical gold, you will have to pay the coin making charges. This would typically be at least 3 per cent of the cost of the gold accumulated and could go higher.
And there are delivery charges for the special tamper-proof packaging and logistics provider for it to reach you at your place of residence.
Piling the charges on jewellery
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If you prefer to buy jewellery, the costs associated are many. So, there would be making charges that could start from 3 per cent of the weight of gold and go to double-digits depending on the design.
Then there are wastage charges due to gold lost while making a piece of jewellery. For top jewellers, this ranges from 2 per cent to 10 per cent.
Some of these charges can, at times, be negotiated between the buyer and jeweller.
In all cases, there is a 3 per cent total GST added on the final value of the jewellery or coin.
Paperless, low-cost
Perhaps the easiest, most transparent and convenient way of accumulating gold is via the ETF route.
Gold ETFs trade with good volumes mostly on the NSE and also on the BSE.
Trading in ETFs involves two key charges. First is the expense ratio charged by the fund house and the second is the brokerage/trading cost for using demat facilities.
Nippon India ETF Gold BeES, which is the largest gold ETF by assets, charges an expense ratio of 0.82 per cent. The gold ETFs from other large fund houses such as ICICI Prudential, Kotak, HDFC and SBI have expense ratios in the range of 0.5-0.73 per cent.
Brokerage fees could be flat fees of, say, ₹20 charged by some discount brokers or a percentage of the transacted value that could range from 0.1-0.5 per cent for many brokerages.
In case you do not have trading and demat accounts, you can buy mutual funds that invest in their own gold ETFs (gold savings funds/ gold ETF fund of funds). In such cases, there would be an additional expense ratio of 0.35-0.5 per cent applicable, apart from the underlying ETFs expense ratio.
From the ease of transaction to reasonable cost efficiency, gold ETFs seem to be the best mode of investing in gold.
Published on April 5, 2025
