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Want to invest in gold? Zerodha's Nithin Kamath has a suggestion

Zerodha founder & CEO Nithin Kamath said that if an investor is mulling to invest in gold, Sovereign gold bonds followed by Gold ETF/MFs are the best option.Premium
Zerodha founder & CEO Nithin Kamath said that if an investor is mulling to invest in gold, Sovereign gold bonds followed by Gold ETF/MFs are the best option.

  • Zerodha founder & CEO Nithin Kamath said that by choosing Sovereign Gold Bond, gold ETF and gold mutual funds ahead of digital gold an investor will be able to save an additional 5 per cent difference on buying and selling of gold

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In the wake of rising gold prices, investors are mulling to invest in the precious metal. As gold investment is not restricted to physical gold only, people invest in electronic and paper gold as well. So, for those gold investors, who want to invest in other than physical gold option, Zerodha founder and CEO Nithin Kamath has an old suggestion. In an old tweet, Zerodha founder said that Sovereign Gold Bond followed by gold ETF and gold mutual funds should be preferred to digital gold. He said that by choosing Sovereign Gold Bond, gold ETF and gold mutual funds ahead of digital gold an investor will be able to save an additional 5 per cent difference on buying and selling of gold.

Explaining in detail as to why one should invest in SGB, gold ETF or gold mutual funds, Nithin Kamath tweeted, "Seems like everyone is selling digital gold. On digital gold, you lose 3% as GST, up to 2% in commissions, & a spread >5% (buy-sell difference). If you are looking at gold as an investment option, Sovereign gold bonds followed by Gold ETF/MFs are the best option."

Digital gold vs Sovereign Gold Bond vs gold ETF vs gold mutual funds

On why Sovereign Gold Bonds are best among all possible gold investment options, Archit Gupta, Founder & CEO at Clear said, "Investors receive interest of 2.5% per annum from SGBs, which is added to the investor's taxable income and taxed according to the applicable income tax slab. SGBs have a maturity period of eight years. The capital gains one makes from SGBs, if held till maturity, are tax-free. However, investors can prematurely redeem SGBs after five years. If you redeem SGBs between five to eight years, the gains are considered long-term capital gains. It is taxed at 20.8% (including cess) with the indexation benefit."

"Investors can buy and sell SGBs over the stock exchange. If SGBs are sold before three years, the capital gains are added to the investor's income and taxed based on the applicable income tax slab. Moreover, the capital gains earned by investors on selling SGBs over the stock exchange after three years are long-term and taxed at 20% with indexation benefit," said Archit Gupta of Clear.

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