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The Securities and Exchange Board of India, known as SEBI, has cautioned people against investing in digital or e-gold products. These types of investments are not under its control and involve "substantial risks," the market regulator mentioned on Saturday. This alert comes as various online platforms increasingly advertise 'digital gold' as an easy alternative to owning real gold. SEBI stated that these products are not categorized as securities and are not regulated as commodity derivatives. Digital gold allows individuals to purchase and possess small portions of gold online. You acquire it through applications or websites, which promise to keep a corresponding amount of actual 24K gold safe for you in secure vaults. A digital record indicates your ownership of the gold, and you can sell it back whenever you want or request physical delivery. It is promoted as simple and convenient.

How Digital Gold Functions:

You make a payment on an app or website.
The service provider logs an equal amount of gold (measured in grams) to your account.
The provider or their vault keeper asserts that they store real gold in an insured vault. Occasionally, a refiner may issue a brand-specific bar or receipt.
You can sell it back to the platform (providing immediate liquidity) or ask for physical gold or coins (with fees and minimum amounts involved).

How Digital Gold Stacks Up Against Regulated Options:

Gold ETFs are mutual fund shares that represent real gold. These are traded on stock exchanges.
Sovereign Gold Bonds (SGBs) are issued by the government, offer interest, and are tax-efficient if held until they mature.
Electronic Gold Receipts (EGRs) are tradable receipts that are supported by actual gold kept in vaults approved by SEBI.

Advantages Of Digital Gold:

Simple to buy or sell at any time.
You can start buying from Rs 10 to Rs 100.
No need to keep physical gold stored.
Can be exchanged for coins or bars.

Disadvantages Of Investing In Digital Gold:

It is not monitored by SEBI or RBI.
There is no assured protection for investors.
It relies entirely on the trustworthiness and stability of the company.
There may be hidden costs (for delivery, storage, or processing fees).
There are limited legal options if issues arise.

Is Digital Gold Subject To Tax?

In India, purchasing gold, whether in its physical or digital form, generally incurs GST; however, the specific rate for digital gold can differ based on how the provider arranges the product. When you sell digital gold, any earnings are classified as a capital gain, and the tax rate will be determined by how long you've owned it.