We all know the value of gold and love to invest in it from time to time. But with the advancement of technology, people have already started to invest their money in E-Gold. E-gold is nothing but an electronic investment in gold that allows physical conversion of stocks to real gold anytime. The buyers have an alternative to trade and invest in gold without delivery of the physical gold, thus saving the storage and holding cost.
What is E-Gold?
E-gold is a type of exclusive investment scheme that NSEL or National Spot Exchange Limited has launched for the first time in the history of the Indian Commodity market. This scheme enables the user to buy precious metals like gold in electronic form on the trading platform of National Spot Exchanges. You can check out the amount of your gold in your Demat account. E-gold is the only section where you can buy gold in small denominations like 1, 2, or 3 grams. The transaction method of the product is relevant to the cash of the equity market. When you buy an E-gold, it will be settled based on T+2, i.e., the day of the trading and additional two days.
It means if you buy gold today, it will reflect in your Demat account two days from the date of purchasing. Similarly, when you sold an E-gold, the same will be reflected in your account in 2 days from the selling date. However, you will require a Demat account for the transaction of E-gold with any Depository participants associated with NSEL. The names of some of the famous Depository participants are Religare, Karvy, Goldmine, Monarch Capital, SSD Securities, Global capitals, IL&FS, SSD, and SMC securities.
Now you might ask can we surrender these gold units in the exchange and get doorstep delivery whenever we need them. The answer to this question is yes. The buyer can surrender their E-Gold units anytime for the exchange and obtain a doorstep delivery of the gold in the gold coin or bar form. But initially, the delivery will be available if you are a resident of Mumbai, Delhi, or Ahmedabad. Later NSEL has now increased its total number of centers in other cities too for the physical gold delivery of the buyer.
Advantages of E-Gold
Apart from the above benefits, there are other advantages of investing in E-Gold also that are as follows.
E-Gold offers the required requisite liquidity since there is a possibility to sell any quantity of units anytime during the trading exchange hours. Moreover, for selling E-Gold, you will not encounter the same terrible experiences as the ones that you might face when you are selling physical gold. Whenever you sell physical gold, the jewelers will subtract the making charges. For the banks, they refuse to buy back their old gold.
- Less threat of theft
E-gold terminates the theft risk of this precious yellow metal as NSEL acts like a barrier and a custodian for the gold.
Most of us have experienced the horrible experiences of the gold vendor charging an enormous premium during the physical gold purchase. However, there is no such premium in the case of E-gold, as the transactions happen at the prevailing rates of the market. Hence the product pricing also remains transparent.
- Transaction convenience
E-gold offers you a seamless transaction. All you have to do is call your broker and place your transaction order for selling or buying the product. Your Demat account will also soon reflect the transaction for the selling or buying done. You might do the transaction in the NSEL trading hours, which start from 10 AM to 11:30 PM.
E-gold enables the transaction of the buyer or seller with the minimal cost incurred, which is 0.60 INR for every month per unit. It also includes the marginal brokerage charge of 0.50% by the broker. Hence by selecting this gold investment instrument, you will save the holding cost that will otherwise have to be paid while stacking the physical gold in the locker of the bank.
The buyer can always remain assured about the quality of the gold, which NSEL will never compromise. Due to the SEBI or Securities and Exchange Board of India, the underlying gold purity will be 0.995 fineness or more than that.
Disadvantages of E-Gold
After examining all the advantages of the E-gold, it is now time to have a quick look into the drawbacks of investing in it. Hacking a Demat account might be a risk issue. However, with securities systems in their correct place, this type of hacking usually does not occur. At a client accounting level, the buyer or seller requires to maintain all the password secrecy and make sure that it is fully protected.
Taxes and Charges of Investing in E-Gold
Well, let us take a detailed look into the charges and taxes of investing in E-gold as below.
- The charge for converting 1 gram of gold coin is 100 INR, and 8 or 10 gram coins are 400 INR. In the case of one kg or 100-gram coins, the exchange will not charge any cost.
- You need to pay 1% vat throughout the entire country. You also require octroi charges when your purchased gold enters your state for converting the electronics units into the physical gold coins.
- If you hold the product for less than three years, then the short term tax for capital gain will be applicable according to the slab rates. If you hold the E-gold for more than three years, then the tax will be applicable at 10%.
- NSE will hold the product storage charge that is 60 p for every unit /month
How to buy E-gold online?
Buying an E-gold has become exceptionally easy due to online transactions in the following ways.
- Opening a Demat Account
For purchasing any gold commodities in NSE, you will require to have a Demat account. The buyer can keep the separate Demat account for the commodities and equities or keep the same one. For opening an account, anyone can submit all the requirements to NSE.
When you open your account, log into it and start buying the gold. You can trade anytime between 10 AM and 11:30 PM on the weekdays. The NSE will credit all your gold transactions into your Demat account in 2 days of trading.
- Physical delivery
You can also take physical delivery of the gold at any time to any address by redeeming the units of e-gold to the Demat account.
E-gold is now one of the smartest ways of investing in gold, for the advantages it offers to the investors. Since this is not a derivative contract, the betting on this yellow metal will be spontaneous. In other words, E-gold is now trending in the share market as a profitable investment for a longer time.