Digital Gold or Sovereign Gold Bond - Where to Invest?

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Investment options can come in various forms - such as stocks, bonds, bank FDs, or even digital gold or physical gold. Investing in gold is not just about physically storing gold as in the old days. Today, gold investment comes with many options, such as Sovereign Gold Bonds (SGBs), digital gold, etc.


Each investment option comes with its advantages, benefits, and risks. While Both sovereign Gold Bonds and digital gold are good ways to invest, new investors might often wonder which one is safer and which one offers better returns.


What is Sovereign Gold Bond?

Sovereign Gold Bonds (SGBs) are government securities issued by the RBI based on the price of gold per gram.

  • These cannot replace physical gold.
  • Issued in multiples of one gram of gold.
  • The minimum investment is one gram, and the maximum investment limit is:

4 kg for retail investors and HUFs

20 kgs for trusts and similar entities

  • Can be purchased directly or through associated agents:

Licensed stock exchanges

Private or foreign banks

Post office

Government banks

Stock Holding Corporation of India Limited (SHCIL)


What are the benefits of investing in SGB?

Some benefits of investing in Sovereign Gold Bonds include:

Option for physical gold

For investors interested in buying gold for investment purposes, SGB offers a good option. It ensures that the quality of gold remains intact and allows investors to protect themselves from related risks.

Storage cost

Investors can save on the storage cost of physical gold with Sovereign Gold Bonds. Since it's a digital investment, it is held in the investor's demat account.

Return on investment

SGBs offer a 2.5% interest rate, which is not available in other gold investment options. This interest makes them an attractive option as investors earn income on their gold, which is directly deposited into their linked bank accounts.

Tax exemption

Any capital gain on SGB maturity is completely tax-free. This makes it an attractive investment opportunity, especially for long-term investors.

What are the risks associated with SGB investment?

There is a risk of loss if the market price of gold falls below the investor's purchase price. This is not only applicable to Sovereign Gold Bonds but to any form of gold investment.

However, the Reserve Bank of India (RBI) assures investors that they will not incur any loss regarding the quantity of gold allocated through SGB.


What is Digital Gold?

As the name suggests, digital gold is a virtual way of holding and investing in gold. It can be easily purchased online.

With digital gold, investors can store 24-carat gold without worrying about physical delivery. The minimum purchase or sale price is as low as 1 rupee.

It can be purchased online, and the seller keeps it in an insured vault on behalf of the buyer.

Investors can buy digital gold using a demat account (among other options).

It functions as real gold. Investors own a gold bar or a part of gold through digital gold. There is no monitoring by regulators such as RBI or SEBI.


What are the benefits of investing in Digital Gold?

  • Some benefits of investing in digital gold include:
  • Option to choose physical gold delivery
  • The minimum investment amount can be as low as 1 rupee
  • Digital gold is equivalent to 24-carat pure gold
  • It is safely stored and 100% insured
  • This investment can be used as collateral for online loans
  • It can be converted into real jewelry, gold coins, or bullion


Things to consider before investing in Digital Gold

  • Most digital gold platforms have a maximum limit for personal investment, usually up to 2 lakh rupees.
  • Since these transactions are not monitored by any regulator like RBI or SEBI, investors' interests may not be protected.
  • Similar to physical gold, there may be delivery and making charges associated with digital gold.
  • Some companies have lower storage limits - after which investors must either take delivery of the gold or sell it.


Where to Invest - Digital Gold or Sovereign Gold Bond

The table below highlights the main differences between SGB and digital gold, which can help investors choose between these two gold investment options:



Digital Gold

Sovereign Gold Bond


They are not traded on exchanges and can be bought/sold online 24/7.

These are traded on exchanges, so they can be bought/sold only during market functioning.

Lock-in Period

There is no lock-in period.

5 Years


This investment involves buying/selling actual gold held in physical vaults.

Actual gold is not involved here and SGB acts as a reference for the price of gold.


Lump sum GST @ 3%

Demat account opening and transaction costs.

Investment Amount 

It is more affordable as the minimum investment is Rs 1.

It is not affordable for everyone as the minimum investment is 1 gram of gold.


Not monitored by any regulator.

Issued by RBI and comes with a sovereign guarantee.


Higher risk of loss.

Low risk of loss


No interest is earned.

Interest is 2.5% per annum – half yearly payment is available.


Digital gold is treated like physical gold. Returns for less than 36 months are taxable as per the slab. After 36 months, long-term capital gains are taxed at the rate of 20%.

Any capital gain on SGB on maturity is completely tax-free.


Nowadays, digital gold is sold online by many licensed fintech platforms. Instead of investing large amounts in gold coins and bars, investing in it could be a good option.

On the other hand, Sovereign Gold Bonds offer investors the opportunity to earn interest rates lower than those of bank fixed deposits, along with the benefit of fluctuations in gold prices.

Both provide excellent options to avoid buying physical gold. Therefore, the investment decision depends entirely on the investor's choice and investment objectives. Before investing, investors should understand the basics of these options.