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The National Stock Exchange of India’s newly launched Electronic Gold Receipts (EGRs) are gaining traction among investors, emerging as a promising alternative for those looking beyond physical gold investments. The launch of NSE EGRs comes at a time when gold exchange-traded funds (ETFs) have become one of the preferred routes for investors seeking exposure to the precious metals market.
For investors trying to understand what NSE EGRs are and how they differ from gold ETFs, here’s a closer look at five key differences between these two gold investment options.
What is NSE EGR?
The recently launched NSE EGRs are dematerialised securities that lets investors enjoy ownership of gold without worrying about gold storage and its purity. Every unit of NSE EGR is backed by physical gold and investors can buy and sell the EGR.
What is Gold ETF?
A gold etf (Exchange Traded Fund) is a commodity-based fund that tracks the domestic price of physical gold. Investors can buy or sell gold ETF on stock exchanges like regular company shares. They can also trade gold ETF units on platforms like Zerodha, Groww, Angel One, etc.
NSE EGR vs Gold ETF : 5 Differences Explained
Backed By Real Gold
NSE EGR is backed by real and pure gold. The physical gold is stored in Securities and Exchange Board of India-accredited vaults and recorded through depositories. Each receipt is fully backed by gold in storage and can be bought or sold on the NSE, similar to other demat instruments.
Gold ETFs are funds that invest in gold and track the price of the yellow metal on a real-time basis.
Conversion Into Real Gold
As per NSE website, NSE EGR also comes with the option to convert to/from physical gold as per the prescribed process. Meanwhile, there is no such option available in gold ETF.
Gold ETF, NSE EGR Taxation Difference
NSE EGR investment does not attract GST, however, investors may have to pay GST if they plan to convert it into physical gold. NSE EGR trading may attract capital gains taxes.
Buying and selling of gold ETF doesn’t attract any GST but investors may have to pay long term and short term capital gains tax (LTCG and STCG). Investors sometime may have to pay a certain percentage of fund charges as well.
Liquidity
NSE EGR lets investors purchase gold in electronic format at a unified price that remains unchanged across the country at a single point in time. NSE EGR is backed by pure gold.
Gold ETF units are also backed by high-purity gold by the fund. However, terms and conditions vary for different asset management companies (AMCs). Both the investment tools offer high liquidity and transparency to investors to trade on real-time rates.
Different Category
NSE EGR comes in two different categories based on purity, the EGR 999 purit and EGR 995 purity. Gold ETFs are not categories based on gold purity and there are plenty of options available to invest in gold ETFs by different fund houses.
The NSE EGR will be easily tradable on the exchange, it will be more convenient than physical gold and can provide liquidity and assured gold quality. The segment offers fungibility of the gold delivery and settlement guarantee for investors. People can hold NSE EGR in a demat account, like stocks and flexible trading in various gold denominations.
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