What is digital gold? How can you buy it, and can it be converted to physical gold?

Digital gold is a form of investment that allows individuals to buy, hold and sell 24-karat physical gold digitally without taking immediate physically possession of the metal. The gold purchased is backed by physical gold of equivalent value, which is stored by the service provider in secure vaults on behalf of the buyer.

Investors can purchase digital gold online through various fintech platforms, payment apps and brokerage applications, often starting with small amounts, making it ideal for first-time investors, small savers, and those who prefer the convenience of online transactions over purchasing physical gold.

Depending on the platform’s terms and minimum quantity requirements, the digital gold that your accumulated over time can later be sold online or converted into physical gold such as coins or bars, but there is a catch that investors must know before making any investments.

Not backed by SEBI or RBI

Unlike Gold ETFs (exchange-traded funds) and other market-linked assets, digital gold is not currently regulated by authorities such as the Securities and Exchange Board of India (SEBI) or the Reserve Bank of India (RBI).

This means investors primarily depend on the credibility of the platform and its vault partners, as digital gold does not operate under a uniform regulatory framework governing disclosures, investor protection or operational standards.

All you need to know about digital gold

The price of digital gold is displayed on the platform in real time and is linked to domestic gold rates, which broadly track international spot gold prices along with applicable taxes, import duties and platform margins.

In digital gold, the investor does not take direct possession of physical gold at the time of purchase. Instead, the buyer gets a beneficial claim over a specified quantity of gold that is stored in the vault. The investor does not own a specific coin or gold bar unless physical delivery is requested.

After each transaction, the provider will give you a proof of ownership, which includes the invoice or purchase receipt, according to a report by Groww. The documents should include the purchase date and time, the exact gold weight (in grams), the price per gram, and the total amount you paid, thereby confirming the legal fund transfers for a particular allotment of gold.

How to buy digital gold?

Here is a step-by-step guide on how you can purchase digital gold units:

Step 1: Choose a trusted platform offering digital gold services and complete the required Know Your Customer (KYC) verification to create an account.

Step 2: Open the digital gold section on the app or website and enter the amount and quantity of gold you wish to purchase.

Step 3: Review the live gold price, applicable charges and terms before proceeding and then place your order.

Step 4: Make the payment using the available payment options such as UPI, netbanking or debit/credit cards.

Step 5: The platform will instantly purchase physical gold and store it in an insured vault through its partnered vault provider in your name.

Step 6: Once the transaction is completed, the purchased gold will reflect in your digital gold holdings on the platform.

Investors can later choose to sell the holdings online or convert them into physical gold, subject to the platform’s minimum quantity requirements and delivery charges. While you own the units of gold, the sole responsibility for managing the asset's security and storage lies upon the provider.

How is digital gold taxed in India?

Digital gold is taxed in a manner similar to physical gold under capital gains tax rules. If digital gold is sold within 24 months from the date of purchase, the gains are treated as Short-term capital gains (STCG). These gains are added to the investor's total taxable income and taxed as per the applicable income tax slab rate.

If the holding period exceeds 24 months, the gains are classified as long-term capital gains (LTCG). In such cases, tax is levied at 12.5% without the benefit of indexation, as per the applicable capital gains tax rules.