The festival of Dhanteras will be celebrated on October 23 and people across the country would invest in buying gold, as it is considered one of the most preferred investment options in India on the auspicious occasion.
Apart from buying physical gold, today, people have several options to invest in the precious metal. One such popular option is digital gold, which can be purchased online, wherein an equivalent amount of physical gold is paid and stored in a secured vault on the customer's behalf. The option to buy digital gold is easily available over several platforms including PhonePe, Paytm, etc.
Most of these platforms work with government recognised gold refiners in the country such as MMTC-Pamp, Augmont and SafeGold to provide the service. Digital gold is one of the most secure investment options, but involves some risk and conditions.
Here are a few things to keep in mind before buying digital gold:
Charges and purity
Most platforms charge 2 to 3 percent more for digital gold as it covers the bank/ credit card payment charges. There is 3 percent GST levied on digital gold as well. However, customers can’t recoup the GST amount when the sell back their gold as GST is not recoverable by end customers.
For purity, most platforms offer 24KT, 99.9 percent pure gold which is certified independently to ensure purity. However, customers should confirm the quality of gold as a part of due diligence before buying digital gold.
There is no limit on the purchase of digital gold and investors can buy it for as little as Re.1. There is no upper limit either. However, digital gold platforms may have additional know your customer (KYC) requirements for purchases above Rs 1.5-2 lakh.
Conversion to physical gold and delivery
If you invest in digital gold through platforms which mostly work with MMTC-Pamp, Augmont and SafeGold, your gold is stored in a digital vault, which you can get in physical form anytime by paying nominal charges.
However, in the case of jewellers with their own platforms, it is not known whether the gold purchased is actually stored in a vault. Some jewellers claim that gold is kept in vaults abroad to save import duty.
Regulation and supervision
Despite its rapid growth, the digital gold industry does not have a regulatory authority. This places the onus on digital gold buyers to do their own due diligence. So far, only SEBI has stepped in to bar stockbrokers from selling digital gold.
