Is It Safe to Invest in Digigold?

Gold has historically been the safety net for Indian households—a hedge against inflation and a symbol of wealth. However, the age-old tradition of buying physical gold is undergoing a digital transformation. With the rise of fintech apps, the ability to invest in digigold has become as easy as ordering groceries. You can buy gold for as little as ₹1, but the burning question remains: Is it actually safe?

As of late 2025, the landscape of gold investment has shifted dramatically due to new regulatory advisories and market changes. This article dives deep into the mechanics of digital gold, the hidden risks that apps don’t tell you, and whether you should invest in digigold or look for regulated alternatives.

What Exactly is Digital Gold?

Before analyzing the safety, we must understand the product. Digital gold is essentially a method of buying physical gold in virtual quantities. When you use a payment app or a dedicated investment platform to invest in digigold, you are paying a trading company to buy a corresponding amount of physical gold and store it in a secured vault on your behalf.

Unlike buying jewelry, where you pay for making charges and worry about theft, digital gold allows you to accumulate wealth in fractional amounts. You don’t need thousands of rupees; you can start with loose change.

How It Works

1. Purchase: You pay money via an app (e.g., PhonePe, Paytm, Google Pay, or Jar).
2. Vaulting: The service provider (usually companies like MMTC-PAMP, SafeGold, or Augmont) purchases 24K gold of 99.9% purity and stores it in a vault.
3. Ownership: You see the gold balance in your digital wallet, but the physical metal sits in a vault.
4. Redemption: You can sell the gold back at market rates or, in some cases, convert it into gold coins/bars for delivery.

The Regulatory Reality: Is It Safe to Invest in Digigold?

This is the most critical section for any prospective investor. As of November 2025, the Securities and Exchange Board of India (SEBI) has issued fresh cautions regarding digital gold.

The blunt answer is: Digital Gold is unregulated.

Unlike stocks, mutual funds, or Gold ETFs (Exchange Traded Funds), which are tightly regulated by SEBI, or bank deposits regulated by the RBI, digital gold falls into a regulatory grey area. When you invest in digigold, you are essentially entering a private contract with the seller.

The SEBI Warning

SEBI has explicitly stated that digital gold products are not “securities” under its purview. This means:

• No Investor Protection: If the platform goes bankrupt or the vaulting agency defaults, you do not have access to the investor protection funds or the ombudsman mechanisms available for stock market investors.
• Operational Risk: You are trusting the audit processes of a private company. While reputable providers like MMTC-PAMP have strong self-imposed audits, there is no government oversight verifying that the gold you “own” actually exists in the vault 1:1.

Does this mean it is a scam? No. The major providers are legitimate businesses. However, the safety of your capital is theoretically lower than in a government-regulated instrument.

The Hidden Costs When You Invest in Digigold

Marketing campaigns often highlight the low entry barrier (“Buy gold for ₹10!”), but they rarely highlight the costs that eat into your returns. If you plan to invest in digigold for profit, you need to do the math.

1. The GST Trap

Every time you buy digital gold, you pay a 3% GST (Goods and Services Tax) upfront.

• Scenario: You invest ₹10,000.
• Result: Only ₹9,700 worth of gold is actually credited to you. ₹300 is gone immediately as tax.
• Impact: Gold prices must rise by at least 3% just for you to break even.

2. The Spread (Buy-Sell Difference)

Have you noticed that the buying price and selling price of digital gold are different at the same specific moment? This is called the “spread.”

• Buying Price: Often 2-3% higher than the market rate to cover brokerage and hedging costs.
• Selling Price: Often lower than the market rate.
• Total Hit: Combined with GST, you might start your investment at a 5% to 6% loss immediately.

3. Holding Charges

Most platforms offer free storage for a limited period (usually 2 to 5 years). After this, if you haven’t sold the gold or taken delivery, you may be charged a holding fee, further eroding the value of your asset.

Why Do People Still Invest in Digigold?

Despite the regulatory warnings and costs, millions of Indians continue to invest in digigold. Why? The value proposition lies in usability rather than pure investment returns.

1. Fractional Investment

For a college student or a low-income earner, saving ₹60,000 to buy 10 grams of gold is impossible. Digital gold democratizes access, allowing them to save in gold with just ₹100 a month.

2. Ease of Use

The friction is zero. You don’t need a Demat account, you don’t need KYC for small amounts, and you don’t need to visit a broker. It is as simple as a UPI transaction.

3. Purity Assurance

When you buy from a local jeweler, purity can be a concern (22K vs 24K). Digital gold is standardized at 24K (99.9% purity), usually certified.

4. Gifting

Digital gold has become a popular gifting option during festivals like Dhanteras and Akshaya Tritiya, where users can transfer gold balances instantly to friends or family.

The Alternatives: Digital Gold vs. Gold ETFs vs. SGBs

With the recent news in late 2025 that the government has paused/stopped the issuance of new Sovereign Gold Bonds (SGBs), the comparison landscape has changed. If you want to invest in digigold solely for returns, you must look at Gold ETFs.

Feature	Digital Gold	Gold ETFs (Regulated)	Sovereign Gold Bonds (SGB)
Regulation	Unregulated (High Risk)	SEBI Regulated (High Safety)	RBI Issued (Max Safety)
Purity	24K (99.5%+)	24K (99.5%+)	24K (99.9%)
Cost	3% GST + Spread (High)	Brokerage (Low) + Expense Ratio (0.5-1%)	No GST, Interest Income
Entry Barrier	₹1	1 Unit (~1 gram or less)	1 Gram (Expensive)
Liquidity	Instant (24/7)	Market Hours (High)	Low (8 Year Lock-in)
Storage Limit	Usually 5 Years max	Perpetual	8 Years

The Verdict:

• For Safety & Returns: Gold ETFs are superior. They are regulated, transparent, and have lower costs.
• For Convenience & Small Savings: Digital gold wins. It acts more like a “digital piggy bank” than a serious investment vehicle.

Strategic Advice: How to Invest in Digigold Safely

If you still decide that the convenience outweighs the risks, follow these safety protocols to protect your money:

1. Stick to the Big Three

Only invest in digigold through platforms backed by the three major vaulting agencies in India:

• MMTC-PAMP: A joint venture between a Swiss bullion brand and the Government of India undertaking. (Highly trusted).
• SafeGold: Backed by private equity and heavily integrated into apps like PhonePe.
• Augmont: A major player in the bullion industry.
• Avoid: Unknown apps or telegram groups offering “cheap gold.”

2. Don’t Treat it as a Life Savings Account

Do not store lakhs of rupees in digital gold. Because of the lack of regulation, you should use it for small accumulations. Once you accumulate a significant amount (e.g., 5 or 10 grams), either redeem it as coins or sell it and move the money to a Gold ETF.

3. Check the “Sell” Price Before You Buy

Before you tap “Buy,” look at the “Sell” price on the same screen. Calculate the difference. If the app is selling to you at ₹7,500/gm but buying back at ₹7,100/gm, understand that you are losing ₹400 per gram instantly.

4. Monitor the Holding Period

Set a calendar reminder. If your app only offers free storage for 2 years, ensure you sell or take delivery before that period ends to avoid penalty charges.

Conclusion: Is It Worth It?

The question “Is it safe to invest in digigold” has a nuanced answer. It is physically safe in terms of purity and vaulting (if using major providers), but it is financially inefficient and regulatory risky.

For the serious investor looking to build a retirement corpus or hedge a portfolio, digital gold is not recommended. The spreads and lack of SEBI protection make it inferior to Gold ETFs.

However, for the casual saver who wants to convert a spare ₹500 into gold instantly, or for someone who finds Demat accounts too complex, digital gold serves a purpose. It is better to save in digital gold than to spend that money on impulsive consumer goods, provided you understand that you are paying a premium for that convenience.

Final Recommendation: Use digital gold as a stepping stone. Start there if you must, but graduate to SEBI-regulated Gold ETFs for your substantial investments.

Frequently Asked Questions (FAQ)

1. Is digital gold approved by the RBI?

No. Digital gold is not regulated by the Reserve Bank of India (RBI) or the Securities and Exchange Board of India (SEBI). It is sold by private entities. This is why SEBI recently issued warnings advising investors to be cautious about the lack of regulatory recourse.

2. Can I convert my digital gold into physical gold?

Yes, most platforms allow you to convert your accumulated digital gold into physical coins or bars. However, you will have to pay “making charges” and delivery fees. The minimum threshold for delivery is usually 0.5 grams or 1 gram.

3. Do I have to pay tax when I invest in digigold?

Yes. You pay 3% GST at the time of purchase. Furthermore, when you sell the gold, capital gains tax rules apply. If sold within 3 years, profits are added to your income and taxed as per your slab. If sold after 3 years, it is taxed as Long Term Capital Gains (LTCG).

4. What happens if the digital gold app shuts down?

This is the primary risk. Since there is no government regulation, you are relying on the trustee appointed by the gold provider. Theoretically, the trustee holds the gold on your behalf, so even if the app (the interface) fails, you should still have a claim on the gold with the vault provider (like MMTC-PAMP). However, claiming this could be a tedious legal process.

5. Why is the buying price of digital gold higher than the market price?

The price you see on apps includes the cost of the gold, the 3% GST, brokerage fees, storage costs, and insurance premiums. This “all-inclusive” price is why it is higher than the live gold rate you might see on TV news.

6. Is it better to invest in digigold or Gold ETFs?

For pure investment purposes, Gold ETFs are better. They are safer (regulated), cheaper (no GST on purchase, lower spreads), and highly liquid. You should invest in digigold only if you do not have a Demat account or want to buy very small amounts (under ₹500).

Gold has historically been the safety net for Indian households—a hedge against inflation and a symbol of wealth. However, the age-old tradition of buying physical gold is undergoing a digital transformation. With the rise of fintech apps, the ability to invest in digigold has become as easy as ordering groceries. You can buy gold for as little as ₹1, but the burning question remains: Is it actually safe?

As of late 2025, the landscape of gold investment has shifted dramatically due to new regulatory advisories and market changes. This article dives deep into the mechanics of digital gold, the hidden risks that apps don’t tell you, and whether you should invest in digigold or look for regulated alternatives.

What Exactly is Digital Gold?

Before analyzing the safety, we must understand the product. Digital gold is essentially a method of buying physical gold in virtual quantities. When you use a payment app or a dedicated investment platform to invest in digigold, you are paying a trading company to buy a corresponding amount of physical gold and store it in a secured vault on your behalf.

Unlike buying jewelry, where you pay for making charges and worry about theft, digital gold allows you to accumulate wealth in fractional amounts. You don’t need thousands of rupees; you can start with loose change.

How It Works

1. Purchase: You pay money via an app (e.g., PhonePe, Paytm, Google Pay, or Jar).
2. Vaulting: The service provider (usually companies like MMTC-PAMP, SafeGold, or Augmont) purchases 24K gold of 99.9% purity and stores it in a vault.
3. Ownership: You see the gold balance in your digital wallet, but the physical metal sits in a vault.
4. Redemption: You can sell the gold back at market rates or, in some cases, convert it into gold coins/bars for delivery.

The Regulatory Reality: Is It Safe to Invest in Digigold?

This is the most critical section for any prospective investor. As of November 2025, the Securities and Exchange Board of India (SEBI) has issued fresh cautions regarding digital gold.

The blunt answer is: Digital Gold is unregulated.

Unlike stocks, mutual funds, or Gold ETFs (Exchange Traded Funds), which are tightly regulated by SEBI, or bank deposits regulated by the RBI, digital gold falls into a regulatory grey area. When you invest in digigold, you are essentially entering a private contract with the seller.

The SEBI Warning

SEBI has explicitly stated that digital gold products are not “securities” under its purview. This means:

• No Investor Protection: If the platform goes bankrupt or the vaulting agency defaults, you do not have access to the investor protection funds or the ombudsman mechanisms available for stock market investors.
• Operational Risk: You are trusting the audit processes of a private company. While reputable providers like MMTC-PAMP have strong self-imposed audits, there is no government oversight verifying that the gold you “own” actually exists in the vault 1:1.

Does this mean it is a scam? No. The major providers are legitimate businesses. However, the safety of your capital is theoretically lower than in a government-regulated instrument.

The Hidden Costs When You Invest in Digigold

Marketing campaigns often highlight the low entry barrier (“Buy gold for ₹10!”), but they rarely highlight the costs that eat into your returns. If you plan to invest in digigold for profit, you need to do the math.

1. The GST Trap

Every time you buy digital gold, you pay a 3% GST (Goods and Services Tax) upfront.

• Scenario: You invest ₹10,000.
• Result: Only ₹9,700 worth of gold is actually credited to you. ₹300 is gone immediately as tax.
• Impact: Gold prices must rise by at least 3% just for you to break even.

2. The Spread (Buy-Sell Difference)

Have you noticed that the buying price and selling price of digital gold are different at the same specific moment? This is called the “spread.”

• Buying Price: Often 2-3% higher than the market rate to cover brokerage and hedging costs.
• Selling Price: Often lower than the market rate.
• Total Hit: Combined with GST, you might start your investment at a 5% to 6% loss immediately.

3. Holding Charges

Most platforms offer free storage for a limited period (usually 2 to 5 years). After this, if you haven’t sold the gold or taken delivery, you may be charged a holding fee, further eroding the value of your asset.

Why Do People Still Invest in Digigold?

Despite the regulatory warnings and costs, millions of Indians continue to invest in digigold. Why? The value proposition lies in usability rather than pure investment returns.

1. Fractional Investment

For a college student or a low-income earner, saving ₹60,000 to buy 10 grams of gold is impossible. Digital gold democratizes access, allowing them to save in gold with just ₹100 a month.

2. Ease of Use

The friction is zero. You don’t need a Demat account, you don’t need KYC for small amounts, and you don’t need to visit a broker. It is as simple as a UPI transaction.

3. Purity Assurance

When you buy from a local jeweler, purity can be a concern (22K vs 24K). Digital gold is standardized at 24K (99.9% purity), usually certified.

4. Gifting

Digital gold has become a popular gifting option during festivals like Dhanteras and Akshaya Tritiya, where users can transfer gold balances instantly to friends or family.

The Alternatives: Digital Gold vs. Gold ETFs vs. SGBs

With the recent news in late 2025 that the government has paused/stopped the issuance of new Sovereign Gold Bonds (SGBs), the comparison landscape has changed. If you want to invest in digigold solely for returns, you must look at Gold ETFs.

Feature	Digital Gold	Gold ETFs (Regulated)	Sovereign Gold Bonds (SGB)
Regulation	Unregulated (High Risk)	SEBI Regulated (High Safety)	RBI Issued (Max Safety)
Purity	24K (99.5%+)	24K (99.5%+)	24K (99.9%)
Cost	3% GST + Spread (High)	Brokerage (Low) + Expense Ratio (0.5-1%)	No GST, Interest Income
Entry Barrier	₹1	1 Unit (~1 gram or less)	1 Gram (Expensive)
Liquidity	Instant (24/7)	Market Hours (High)	Low (8 Year Lock-in)
Storage Limit	Usually 5 Years max	Perpetual	8 Years

The Verdict:

• For Safety & Returns: Gold ETFs are superior. They are regulated, transparent, and have lower costs.
• For Convenience & Small Savings: Digital gold wins. It acts more like a “digital piggy bank” than a serious investment vehicle.

Strategic Advice: How to Invest in Digigold Safely

If you still decide that the convenience outweighs the risks, follow these safety protocols to protect your money:

1. Stick to the Big Three

Only invest in digigold through platforms backed by the three major vaulting agencies in India:

• MMTC-PAMP: A joint venture between a Swiss bullion brand and the Government of India undertaking. (Highly trusted).
• SafeGold: Backed by private equity and heavily integrated into apps like PhonePe.
• Augmont: A major player in the bullion industry.
• Avoid: Unknown apps or telegram groups offering “cheap gold.”

2. Don’t Treat it as a Life Savings Account

Do not store lakhs of rupees in digital gold. Because of the lack of regulation, you should use it for small accumulations. Once you accumulate a significant amount (e.g., 5 or 10 grams), either redeem it as coins or sell it and move the money to a Gold ETF.

3. Check the “Sell” Price Before You Buy

Before you tap “Buy,” look at the “Sell” price on the same screen. Calculate the difference. If the app is selling to you at ₹7,500/gm but buying back at ₹7,100/gm, understand that you are losing ₹400 per gram instantly.

4. Monitor the Holding Period

Set a calendar reminder. If your app only offers free storage for 2 years, ensure you sell or take delivery before that period ends to avoid penalty charges.

Conclusion: Is It Worth It?

The question “Is it safe to invest in digigold” has a nuanced answer. It is physically safe in terms of purity and vaulting (if using major providers), but it is financially inefficient and regulatory risky.

For the serious investor looking to build a retirement corpus or hedge a portfolio, digital gold is not recommended. The spreads and lack of SEBI protection make it inferior to Gold ETFs.

However, for the casual saver who wants to convert a spare ₹500 into gold instantly, or for someone who finds Demat accounts too complex, digital gold serves a purpose. It is better to save in digital gold than to spend that money on impulsive consumer goods, provided you understand that you are paying a premium for that convenience.

Final Recommendation: Use digital gold as a stepping stone. Start there if you must, but graduate to SEBI-regulated Gold ETFs for your substantial investments.

Frequently Asked Questions (FAQ)

1. Is digital gold approved by the RBI?

No. Digital gold is not regulated by the Reserve Bank of India (RBI) or the Securities and Exchange Board of India (SEBI). It is sold by private entities. This is why SEBI recently issued warnings advising investors to be cautious about the lack of regulatory recourse.

2. Can I convert my digital gold into physical gold?

Yes, most platforms allow you to convert your accumulated digital gold into physical coins or bars. However, you will have to pay “making charges” and delivery fees. The minimum threshold for delivery is usually 0.5 grams or 1 gram.

3. Do I have to pay tax when I invest in digigold?

Yes. You pay 3% GST at the time of purchase. Furthermore, when you sell the gold, capital gains tax rules apply. If sold within 3 years, profits are added to your income and taxed as per your slab. If sold after 3 years, it is taxed as Long Term Capital Gains (LTCG).

4. What happens if the digital gold app shuts down?

This is the primary risk. Since there is no government regulation, you are relying on the trustee appointed by the gold provider. Theoretically, the trustee holds the gold on your behalf, so even if the app (the interface) fails, you should still have a claim on the gold with the vault provider (like MMTC-PAMP). However, claiming this could be a tedious legal process.

5. Why is the buying price of digital gold higher than the market price?

The price you see on apps includes the cost of the gold, the 3% GST, brokerage fees, storage costs, and insurance premiums. This “all-inclusive” price is why it is higher than the live gold rate you might see on TV news.

6. Is it better to invest in digigold or Gold ETFs?

For pure investment purposes, Gold ETFs are better. They are safer (regulated), cheaper (no GST on purchase, lower spreads), and highly liquid. You should invest in digigold only if you do not have a Demat account or want to buy very small amounts (under ₹500).