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e-Gold is another purchase option, involving investments in units traded on the National Stock Exchange (NSEL). Here, the investor is required to have a demat account with an affiliate of NSEL. e-Gold’s brokerage and transaction charges are lower than gold ETFs as there are no fund management charges. One can take delivery of gold or sell it in the exchange.
But there is also a negative point here from the tax angle—under e-Gold, one has to hold the yellow metal for 36 months to enjoy long-term capital gain benefits, and this is taxed at 20 per cent. For ETFs (Exchange Traded Funds) and gold funds, the holding period to be classified as long-term is
only one year. After a year, ETF and gold funds will suffer 10 per cent tax without indexation and 20 per cent after indexation. For a small investor, gold ETF would appear to be the best option, as it meets his needs without difficulties in terms of creating a separate demat account, tax implications and wealth tax.