Comparison of Physical Gold Vs Gold ETF Vs Sovereign Gold Bonds

 

Points	Physical Gold	Gold ETF	Sovereign Gold Bonds
What are they?	Physical Gold are usually purchased in the form of bars, jewels, and coins.	ETF is similar to a mutual fund, AMC hold the assets and charges a maintenance fee for the same. They can be bought and sold through stock exchanges.	SGB are government bonds that are held in the books of RBI and in Demat Form. Thus, making it free of any charge.
Regulator	Nil	SEBI	RBI
Purchase Mode	From Jewellers	From Stock Exchange	From Banks and Financial Institutions
Purity of Gold	Purity of Gold always remains a question	High	High
Investment Limit	No Cap	No Cap	Investment Up to 4 KG by Individuals, HUF and 20 Kg by Trust in a Financial Year
Income	Appreciation in Gold Price	Appreciation in Gold Price	2.5% Interest on Initial Investment and Appreciation in Gold Price
Returns	Lower than actual return on gold  * Capital Appreciation – Discount Sale	Lower than actual return on Gold  *Capital Appreciation – AMC Charges	Higher than actual return on gold  * Interest + Capital Appreciation
Safety	Risk on handling physical gold.	Highly Safe	Highly Safe
Short Term Capital Gain	Taxable as per Income Slab	Taxable as per Income Slab	Taxable as per Income Slab
Long Term Capital Gain	Long term capital gain tax applicable after 3 years at 20% With Indexation	Long term capital gain tax applicable after 3 years at 20% With Indexation	No Capital Gain Tax if held till maturity  *Interest Income is taxable as per slab
Collateral against Loan	Yes	No	Yes
Tradability / Exit Route	Conditional Sale	Tradable on Exchange	Tradable on Exchange and Redemption 5th year onwards with Government of India
Storage Cost	High	Nil	Nil

SGB Beats the Physical Gold and ETF by fair margin in terms of returns, safety and liquidity. Mentotax recommends to Stick to SGB for Portfolio diversification, Asset class diversification and high post tax return.

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