E-Gold Vs Gold ETF’s – Which is the best investment option?

E-Gold Vs Gold ETF’s – Which is the best investment optionE-Gold Vs Gold ETF’s – Which is the best investment option?

One of the smartest ways to invest in gold is investing in e-Gold. E-Gold is a unique investment product launched by National Spot Exchange Ltd (NSEL) as part of their e-series commodities products. You can buy and sell e-gold units through NSEL. In this article, I would detail about how to invest in e-Gold and how this is better investment option comparing to Gold ETF’s.

Also read: Should Gold lovers invest in GRT Flexi Gold Plan?

How to invest in e-Gold?

Below is the process to invest in e-Gold.

1) Open Demat account: You need to open a demat account for purchasing commodities through NSEL. There should be separate demat accounts for commodities and equities. You can submit account opening documentation to NSEL and it would take 2-3 days to open an account.

2) Buy the e-gold through NSEL: Login to your NSEL account and buy e-Gold units. NSEL operates between 10.30 am to 11.30 pm from Monday to Friday. You can buy units of 1gm, 2gm, 5gm, 10gm etc. Your gold units would get credited in T+2 days in your demat account with NSEL.

3) Physical delivery: If you want, you can take physical delivery of gold at any time by redeeming your demat account e-gold units. Currently there are 3 physical delivery centers i.e. Mumbai, Delhi and Ahmedabad.

Benefits of investing in e-Gold

  • You can buy in small denominations of 1gm, 2gms etc.
  • You can keep gold in demat form
  • Investing in e-gold is cost effective. The cost of holding is Rs 0.60 per unit per month.
  • The price of e-Gold is linked to Indian gold prices which would help you to track the prices easily.
  • No impurity risks
  • No risk of threat
  • AMC charges are only 0.40% of the value of investment
  • Easy liquidity. You can sell them through NSEL site at any time between 10.30 am to 11.30 pm from Mon to Friday.

E-Gold and Gold ETF’s – Which is better option

While both have similar features, there are few features where they differ.

  1. AMC Charges: NSEL charges 0.40% as AMC charges on e-Gold investments. On other hand, Mutual fund house charges 1% to 2% as AMC charges on Gold ETF’s values.
  2. Price of units: e-Gold price is tracked through Indian gold prices. On other hand, Gold ETF’s track only International Gold Prices. E-Gold gives more realistic picture as it tracks gold prices in India.
  3. Trading: While both e-Gold and Gold ETF’s can be sold between Monday to Friday, e-Gold’s had greater flexibility for liquidity as NSEL operates between 10.30 am to 11.30 pm.  
  4. Demat account: You can use your existing equity demat account for Gold ETF’s trading. However you need a separate demat account with NSEL to buy or sell e-Gold.
  5. Taxation:  If you hold e-gold for less than 36 months (3 years), you need to pay short term capital gain of 20% on returns. Beyond 3 years, it would attract long term capital gain which is 10% on returns. On the other hand, Gold ETF’s sold in less than 1 year would attract short term capital gain (20%) and after 1 year, it would be long term capital gain (10%).

You may also like: Gold mutual funds VS Gold ETF's – Which is best?

Conclusion: While you need to have a separate demat account in NSEL, e-Gold ranks high comparing its features with Gold ETF. If you are looking for more than 3 years time frame, investment in e-Gold would be better investment option. In the falling gold prices, every component of cost reduction would help in increasing your returns in gold.

Readers, how you are investing in Gold? Do you prefer Gold ETF or e-Gold?

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E-Gold Vs Gold ETF’s


  • Prince

    Thanks a lot for the detailed explanation. Well I was planning to go for E-GOLD, but considering the NSEL’s current status, I have hold back… and may go for a physical one.
    I am able to save at least 20/30k annually. Please advice where should I invest. I already have personal mediclaim, SIPs, small FD and PPF along with a short term RD.

  • Mohit

    Dear Suresh,

    Thank you for detailed clarification.
    I appreciate your valuable support to confirm that suppose an House Wife earns 20,000 INR via selling e-gold before 3 years and She don’t have any Income except this 20,000 INR in same FY. Then will there need to Pay this short term Capital gain 20% tax of 20,000, i.e. 4000 INR.

  • prasad

    Is there any recognised organisation still offering E-gold ?

  • Kirupa

    Hi suresh,

    You are an eye opener for indians in investments. appreciations for that. I have three questions.

    I would like to know whether 10 or 20% of the tax has to be paid even when we go for physical conversion of e-gold? 

    Can we convert e-gold into physical gold by directly submiting the e-gold documents at a jewely shop? can you elobrate this process with an example?

    What is the difference between e-gold and paper gold?

    • Hi Kirupa. Thanks for your appreciation. 1) Since you are convering e-gold units into physical gold, there would not be any tax on physical gold 2) No. You need to take delivery from NSEL only. Once you have e-gold units in your demat account. You can submit form for physical delivery and based on documentation submission, they would deliver physical gold at specific centres indicated in our article. 3) You need to be clear about paper gold. It could be e-gold (which I explained earlier) or it could be investing in gold saving scheme by jeweller which would be similar to e-gold, but they are offered by jewellers. No demat account. But you need to buy physical gold jewellery from them at the end of the scheme. paper gold could be gold ETF which already explained here. Pls note that currently NSEL is in mess. Slow down if you want to invest in e-gold

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