Digital Gold vs Gold ETF vs Gold Mutual Fund: Cost, Tax and the Regulator

I want to put money into gold. Should I buy digital gold on an app, a gold ETF through my demat account, or a gold mutual fund?

The digital gold vs gold ETF vs gold mutual fund choice looks like a question about fees, and fees matter. But the first difference is more basic: who regulates what you are buying. Gold ETFs and gold mutual funds are SEBI-regulated mutual fund products. Digital gold is not, and SEBI said so publicly in November 2025. Everything else, from the 3% GST on digital gold to the tax rules that changed in April 2025, comes after that.

The difference that comes before cost: who regulates it

On 8 November 2025 SEBI issued a caution to the public about “Digital Gold/E-Gold Products” sold by online platforms. Its statement is short and unambiguous:

Such digital gold products are different from SEBI regulated gold products as they are neither notified as securities nor regulated as commodity derivatives. They operate entirely outside the purview of SEBI.

SEBI press release PR No. 70/2025, 8 November 2025

SEBI added that “none of the investor protection mechanisms under securities market purview” would be available for digital gold, and that such products may expose investors to counterparty and operational risks. The same release listed what SEBI does regulate for gold investors: gold ETFs offered by mutual funds, exchange-traded commodity derivatives, and Electronic Gold Receipts traded on stock exchanges.

The three routes side by side

Two differences in that table decide most choices. An ETF becomes long-term after 12 months, half the 24 months the other two need. And a gold fund lets you run a SIP without a demat account, at the price of paying for two layers of management: the fund’s own and the ETF’s underneath it.

What 3% GST does to your first rupee

Digital gold is bought at a price that includes 3% GST, the rate the GST schedule sets for gold. You pay it on the way in and do not get it back when you sell. That means the gold you own is worth about 2.9% less than what you paid on day one, and the gold price has to rise 3% before you break even, before counting any spread the platform charges.

A gold ETF has no GST on units; you pay brokerage on each trade and an annual expense ratio deducted from the fund’s value. A gold fund of funds charges its own expense ratio on top of the underlying ETF’s. Over a short holding, digital gold’s one-off 3% is usually the largest cost of the three. Over a long one, the yearly expense ratios add up, which is what the calculator below lets you compare with your own figures.

The tax change older comparisons miss

For one financial year, 2024–25, gold ETFs and gold funds were taxed like debt funds. AMFI’s own tax guide lists “Gold ETFs” and “Fund Of Funds (Domestic)” among the categories that counted as “specified mutual funds” in FY 2024–25, which meant gains on units bought from 1 April 2023 were treated as short-term and taxed at your slab rate however long you held them.

That changed from 1 April 2025. The Finance (No. 2) Act, 2024 redefined a specified mutual fund as one investing more than 65% in debt and money market instruments, or a fund of funds investing 65% or more in such funds. As AMFI puts it, from FY 2025–26 only debt-oriented schemes are covered. Gold ETFs and gold funds are out, so they now follow the ordinary rules: long-term after 12 months for listed ETF units and 24 months for unlisted fund units, taxed at 12.5% without indexation.

Explainers written in 2024 and early 2025 often still describe the old slab-rate treatment. Some newer ones err the other way: Groww’s digital gold comparison describes the long-term rate as “12.5% minus indexation”. Since 23 July 2024 the 12.5% rate applies without indexation, for gold funds and physical or digital gold alike.

Run the numbers on your own amount

The calculator starts with the gold price flat, at 0% a year, so that what you see is the effect of costs and tax alone, not a forecast. Move the gold price slider to test your own assumption, and replace the example expense ratios with the ones in your fund’s factsheet.

Run it at 0% and three years and the order is clear: digital gold starts 3% behind and never closes the gap while the expense ratios are small. Stretch the holding to ten years with a higher fund expense ratio and the fund’s layered cost starts to matter more. The tax column changes the picture only for short holdings, where an ETF becomes long-term a year before the other two.

Where Indian investors are putting their money

AMFI’s monthly data show how fast gold ETFs have grown in the past year. The rise in assets reflects both new money and gold’s price, so the folio count is the cleaner measure of how many more investors have arrived.

There is no comparable official figure for digital gold, because no regulator collects it. That absence is itself part of the comparison.

How to check the costs yourself

Every figure the calculator needs is published somewhere; the work is knowing where.

• Gold ETF or gold fund expense ratio: in the scheme’s monthly factsheet on the fund house’s website, and in AMFI’s total expense ratio disclosures. For a gold fund of funds, check whether the figure quoted includes the underlying ETF’s expenses; the calculator’s fund box should hold the total of both.
• How closely a gold ETF follows gold: the factsheet also reports tracking error. Two ETFs with similar expense ratios can deliver different results if one tracks the gold price less closely.
• Digital gold spread: open the app and compare the buy price and the sell price shown at the same moment. The buy price includes GST; the gap beyond 3% is the platform’s spread, and it can change during the day.
• Your tax position: the capital gains statement from your fund house or registrar shows the purchase date and cost of every unit, which decides whether a sale is short-term or long-term.

Checking these takes a few minutes and settles more than any general comparison can, because costs differ from one fund and one platform to the next.

Matching the route to the investor

• You have a demat account and may sell within two years: a gold ETF, because it turns long-term after 12 months and has no GST.
• You want a monthly SIP and have no demat account: a gold fund of funds, accepting the second layer of expense.
• You want to buy a few hundred rupees at a time on an app: digital gold is the easiest, but you pay 3% GST up front and have no SEBI protection. SEBI’s regulated alternatives are gold ETFs, gold funds and Electronic Gold Receipts.
• You were planning to buy Sovereign Gold Bonds: none have been issued since February 2024, as set out in our guide to where to invest in India.

The regulator decides it before the fees do

On cost, a gold ETF usually wins for anyone with a demat account, and a gold fund is the practical route for SIPs without one. Both are now taxed as ordinary long-term assets again, after a year in which they were not. Digital gold’s advantages are convenience and tiny amounts, bought at a 3% head start for the tax authorities and with no regulator behind the product.

None of this says whether gold itself belongs in your portfolio, or how much. That depends on your goals and the rest of what you own. What the comparison does settle is the route: if you are buying gold as an investment, SEBI has told you which products it stands behind.

This guide explains published rules and data and is not investment advice. For decisions about your own portfolio, consult a SEBI-registered investment adviser.