GOLD
 Gold Exchanges Traded Fund
Exchange Traded Funds (ETFs) are open ended mutual funds that are passively managed and most of them seek to mirror the return of an index, a commodity or a basket of assets. ETFs are listed and traded on stock exchanges like stocks. They enable investors to gain broad exposure to indices or defined underlying asset (commodity) with relative case, on a real-time basis, and at a lower cost than many other forms of investing.
Transforming itself with the changing times, the Income Tax Department of India has launched an easy to use online facility for filing Income Tax Returns using the Internet. The filing of Income Tax Returns Online offers great convenience, fast in processing and hassle-free option to the assessees. Income Tax Return has several part or phases which we follow for paying tax. To know Income Tax Return in an easy way, it is divided into the following sub sections:
Gold ETFs provided investors a means of participating in the gold bullion market without the necessity of taking physical delivery of gold, and to buy and sell that participation through the trading of a security on stock exchange. Gold ETF would be a passive investment; so, when gold prices move up, the ETF appreciates and when gold prices move down, the ETF loses value.
Gold ETF tracks the performance of Gold Bullion. Gold ETFs provide returns that, before expenses, closely correspond to the returns provided by physical Gold. Each unit is approximately equal to the price of 1 gram of Gold. But, there are Gold ETFs which also provide a unit which is approximately equal to the price of ½ gram of Gold.
nantly owned by Non residents of Indian Nationality/ Origin
Why should an investor invest in Gold ETF?
- No worry on adulteration
- Gold provides diversification to the portfolio
- Gold is considered as a Global Asset Class
- Gold is used as a Hedge against Inflation
- Gold is considered to be less volatile compared to equities
- Held in Electronic Form
- Store of value
- Extremely Liquid
Advantages of Investing in Gold ETFs
- Potentially cheaper to have price exposure to gold price as compared to other available avenues
- Quick and convenient dealing through demat account
- No storage and security issue for investors
- Transparent pricing
- Taxation of Mutual Fund
- Can be traded on stock exchange like buying / selling a stock
- Ideal for retail investor as minimum lot size to trade is one unit on secondary market
NAV of a unit will track price of approximately ½ or 1 gram of gold
Comparison of Gold ETF with Physical Gold
| S No |
Parameter |
Jeweller |
Bank |
1 |
How Gold is held |
Physical(Bars / Coins) |
Physical(Bars / Coins) |
| 2 |
Pricing |
Differs from one to another. Neither transparent nor standard. |
Differs from bank to bank. Not Standard. |
| 3 |
Buying Premium above gold price |
Likely to be more |
Likely to be more |
| 4 |
Making Charges |
Charges are incurred |
Charges are incurred |
| 5 |
Impurity Risk |
High |
Nil |
| 6 |
Storage Requirement |
Locker / Safe |
Locker / Safe |
| 7 |
Security of Asset |
Investor is responsible |
Investor is responsible |
| 8 |
Resale |
Conditional and uneconomical |
Banks do not buy back |
| 9 |
Convenience in Buying / Selling |
Less convenient, as Gold needs to be moved physically |
Less convenient, as Gold needs to be moved physically |
| 10 |
Quantity to Buy / Sell |
Available in standard denomination |
Available in standard denomination |
| 11 |
Bid Ask Spread |
Very High |
Can’t Sell Back |
| 12 |
Risk of Theft |
Yes, possible |
Yes, possible |
| 13 |
Wealth Tax |
Yes |
Yes |
| 14 |
Long Term Capital Gains Tax |
Only after 3 years |
Only after 3 years |
Investor Requirements for trading in Gold ETF
- Trading account with a stock exchange broker
- Demat account as Gold ETF can be traded only in demat form
Settlement: The transactions are settled with T+2 rolling settlement
Load Structure
Entry Load: Nil
Exit Load: Nil
Tax treatment of Gold ETF
The Gold ETF is classified under mutual fund and will be taxed as per non equity mutual fund taxation rules. Investor investing in Gold ETF need not pay wealth tax. Investor has to pay taxes after redemption as per the tax laws applicable for non equity mutual fund. But, when the Gold ETF is redeemed for physical gold the taxation rules will be similar to that of physical gold.
Tax treatment of Gold ETF
- Benchmark Mutual Fund - Gold Benchmark Exchange TradedScheme (NSE Symbol: GOLDBEES)
- Kotak Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: KOTAKGOLD)
- UTI Mutual Fund - UTI Gold Exchange Traded Fund (NSE Symbol: GOLDSHARE)
- Reliance Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: RELGOLD)
- Quantum Gold Fund - Exchange Traded Fund (ETF) (NSE Symbol: QGOLDHALF)
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