Do you know about eGold?

Almost everyone knows about various Gold ETF But, do you know about the concept of ‘e-Gold’ (electronic gold) which houses equivalent physical gold maintained in exchange designated vault?

First let us understand the differance between Gold ETF and E-Gold

Gold ETF	eGOLD
Gold ETF is an exchange traded mutual fund scheme	e-Gold is physical gold held in dematerialized form which can be traded electronically at National Spot Exchange Ltd (NSEL), in India.
Objective of Gold ETF is to track closely the spot prices of the precious yellow metal, it does not necessarily hold physical gold stock at its fullest	e-Gold is a digital gold currency that allows you to trade or even redeem physical gold from your demat account.
It can’t be converted to Physical gold	It can be converted to physical gold. For conversion of e-gold into physical gold as per the current rates, VAT will be 1 % of the value of goods. In case physical delivery takes place in Mumbai, octroi @ 0.1 % of the value of delivery will also be applicable.
Only transaction charges while you buy or sell are applicable over here as per your brokerage.	Apart from transaction charges, The Exchange shall levy the turnover charges of Rs. 20 per lakh of turnover to both buyer and seller member on monthly basis. This shall be applicable on all executed transactions. Storage charges shall be levied by the Exchange on monthly basis. Such charges will be computed based on the holding in the respective accounts on the last Saturday of every month. The charges per month per unit of E-GOLD will be 60 paise only.

Benefits of trading in E-Gold

•  Convenience to trade and transparency in price.
• ETFs as fund houses charge for AMCs; e-Gold is digital gold currency.
• E-Gold can be redeemed for physical gold, unlike Gold ETFs.
• In future, e-Gold can be converted into jewellery; unlike Gold ETFs.
• E-Gold is tradable for longer hours than Gold ETFs.
• E-Gold are spot rates of gold, Gold ETFs intends to mirror gold prices.

Taxation

The e-Gold units will be treated as Gold for tax purposes. The units should be held for more than 36 months for availing the confessional tax treatment accorded to long term capital gains and for exemption eligibility under Section 54 F or 54 EC of Income Tax Act, 1956. You will also have to pay wealth tax on the market value of the electronic units lying in your account as on 31st March of each year, if the total value of your taxable wealth together with market value of e-Gold exceeds Rs. 30 lacs.

	Gold Mutual fund	Gold ETF	eGold	Gold from jeweler
Short term capital gains	General rate of taxation	General rate of taxation	General rate of taxation	General rate of taxation
Time in which asset becomes long term ( which is eligible for lower rate of tax @ 10 %)	Yes, within one year only , the rate of tax goes down to 10 %	Yes, within one year only , the rate of tax goes down to 10 %	In 3 years it becomes long term capital asset.	In 3 years it becomes long term capital asset.
Long term Gains tax	10 % without indexation	10 % without indexation	20%	20%
Wealth tax	Nil	Nil	Yes	Yes
Dividend	Tax Free	Tax Free	No dividend	No dividend

Conclusion

Though the product serves the purpose of common man of accumulating gold in small-small quantities over a period of time, not many people are aware of this product. If you are looking to park your money temperorily in gold related investment, then Gold ETF is best. In case you are looking to accumulate & invest your money in gold for your kids then eGold is the best method.

Disclaimer: This Blog, its owner, creator & contributor are not responsible for any loss arising out of any information, post or recommendations appearing on this blog. Investors are advised to consult financial consultant before acting on any such information.