Home Gold Investing What Are The 4 Major Disadvantages of Digital Gold Investment? Kuka USA

What Are The 4 Major Disadvantages of Digital Gold Investment? Kuka USA

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Disadvantages with GST
Disadvantages with GST

Buying digital gold will save your making charges, but the tax will have to be paid here. Digital gold investment is generally purchased with a 3% GST, like physical gold investments of gold ornaments/gold coins. But when you will sell the digital gold, you cannot certainly have the GST back from the next buyers, only you will have to bear this. So, you will lose that 3% for taxation. If the calculations are done, they will be easier to understand. If an investor purchases digital gold of Rs. 500, he/she will have to pay around Rs. 515. But when the holding will be sold, along with the current market price of gold, you will not get the 3% back. So, in the case of Rs. 500 investment, the amount of loss is minimal, but for a large amount of investment, it can be a problem.

Disadvantages with spread cost and capital gain tax

In the case of digital gold, there is an additional cost charged from an investor, which is spear cost. A spread cost will be counted with multiple additional costs like – storage cost and insurance cost, etc. The spread cost is generally ranged between 3% and 6%. so, for a big amount of investment this range of additional costs can be a burden for you. Additionally, in digital gold capital gain tax will be added at the time it will be sold by the investor. If you hold the digital gold for less than 3 years, you will be charged with Short Term Capital Gain (STCG) tax. If you hold the gold for longer than 3 years, you will be charged with Long Term Capital Gain (LTCG) tax at 20% (with the indexation benefit), with cess and surcharge.

Disadvantages with regulation

SEBI recently, in its regulation has asked stock brokers not to sell digital gold anymore. SEBI has published a circular for the brokers to comply with the new guideline. The reason SEBI has said it is because there is no rule or regulation around digital gold in the stock exchanges in India. So the brokers cannot sell it without any regulation. This is different for gold ETFs which are regulated by SEBI. Augmont Gold; MMTC-PAMP, and SafeGold brand are the 3 companies that can store the physical gold in their safe vault on behalf of you when you buy it online.

Delivery related disadvantages

Perse, the investor wants to get the gold physically to store, he/she will certainly be paying the making charges of gold and delivery costs. So, while somebody is buying digital gold, he/she must remember that digital gold is the best option if you are only looking for virtual gold. Buying digital gold and then ordering the physical delivery will not be a wise idea. Also, there is a limit of up to what level of gold investment you can order the physical delivery. However, you cannot hold the digital gold for an indefinite period. Either you will have to sell it virtually, or order the delivered physical of it. Hence, advisers usually ask to invest in sovereign gold bonds (SGB), ETF, or gold bonds, rather than digital gold because of similar benefits of easy liquidity.


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Phillip Peters is an independent journalist, entrepreneur, digital marketer and press release publisher. He has a soft spot for technology, gadgets, cryptos and writing about health and politics. He also loves travelling the world! Phillip has been working with KukaUSA full time since September 2018.