As India witnesses another surge in gold purchases during Dhanteras, a new analysis by Sujit Bangar, founder of TaxBuddy.com, reveals striking differences in returns across various forms of gold investments. His data-driven LinkedIn post compares physical gold, jewellery, Gold ETFs, and Sovereign Gold Bonds (SGBs), offering a clear picture of where investors actually gain—or lose.
Bangar highlighted that while Indians traditionally prefer physical gold and jewellery, the perceived value often fails to match actual returns. “There’s a clear gap between perception and performance when it comes to gold. What feels traditional may not always be profitable,” he said.
According to his analysis, an investment of ₹1,00,000 in different gold forms over five years yielded the following results:
- Gold Coins: ₹1,84,031 (CAGR 5.19%)
- Jewellery: ₹1,85,963 (CAGR 3.66%)
- Gold ETFs: ₹1,79,950 (CAGR 8.76%)
- Sovereign Gold Bonds (SGBs): ₹2,02,274 (CAGR 10.59%)
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Bangar pointed out that physical coins and jewellery incur several hidden costs such as GST, making charges, and locker rent, which significantly reduce overall returns. For instance, a ₹1 lakh investment in coins effectively costs around ₹1.29 lakh after adding GST and storage expenses, while jewellery pushes costs up to ₹1.44 lakh.
In contrast, SGBs and ETFs retain the full investment value. SGBs, in particular, offer 2.5% annual interest and zero capital gains tax at maturity—making them the most tax-efficient option.
While physical gold and ETFs attract 12.5% long-term capital gains tax, SGBs remain exempt at redemption. However, the yearly interest from SGBs is taxable.
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Liquidity remains a differentiating factor. ETFs are easily tradable with real-time prices but carry tracking errors and spreads. Physical gold can be sold readily but often below market rates. SGBs, although tradable on exchanges, face lower trading volumes.
Bangar concluded that jewellery remains the least efficient gold investment due to high making charges, sometimes reaching 30%. “These are sunk costs most buyers overlook,” he added.
