What is a gold ETF?

A gold ETF is a mutual fund whose units trade on a stock exchange. You hold the units in a demat account. You do not take a coin or a chain home. The fund buys gold, and the unit price moves with that gold after the fund’s costs. SEBI’s circular of 24 November 2021 set the frame for these schemes, alongside silver ETFs. A gold ETF is one of the gold products SEBI regulates. A balance labelled digital gold on an app is a different product, and SEBI has said that product sits outside its rules.

Scheme documents filed with SEBI after that circular say the fund puts 95% to 100% of its assets in gold and gold-related instruments. The gold is of fineness 995 parts per 1,000, or higher. A small slice can sit in money-market instruments so the fund can pay people who sell. You pay the price quoted on the exchange that day. Your broker adds whatever the plan charges. That brokerage is the broker’s card, not a rate in the SEBI circular, so it is not printed here. The fund’s yearly cost is the total expense ratio, already inside the NAV. For this kind of scheme the cap stated in those documents, under Regulation 52(6)(b), is 1% of daily net assets. A fund can charge less. The factsheet is the number you are paying.

There is no making charge, and no shop GST, on the unit itself. Duties on the gold the fund bought are part of how the NAV is built. You see one price. You can sell on a trading day if the units are in demat and the exchange is open. The price can sit a little above or below the value of the gold inside the fund.

Tax when you sell

Tax starts when you sell. A listed gold ETF is a listed security, so the long-term line is 12 months. A coin uses 24 months. After the ETF’s line, section 197 charges 12.5%, plus 4% cess. There is no indexation. Gold does not get the ₹1.25 lakh exemption that listed shares get under section 198. A gold fund of funds buys the ETF and is often not itself listed, so those units use the 24-month clock. Read the scheme words: “exchange traded” is the ETF, and “fund of fund” is the other one.

The tax on gold guide works the bill in rupees. The capital gains calculator has a listed-gold choice for the ETF. The gold options guide sets the ETF next to jewellery, coins, gold funds, Sovereign Gold Bonds and digital gold.

Mistakes people make

• Calling an app balance a gold ETF. SEBI’s 8 November 2025 caution says digital gold is not a security and not a commodity derivative.
• Forgetting the broker’s charge because the factsheet only shows the fund’s ratio.
• Using the 24-month coin clock on listed ETF units.
• Subtracting the expense ratio from a return that already uses NAV.
• Buying a fund of funds and assuming it has the ETF’s 12-month clock.

The rule

The holding rule is SEBI’s November 2021 circular, read with the scheme document: at least 95% in gold of fineness 995 or higher, and an expense cap of 1% under Regulation 52(6)(b). The tax on a long-term sale of the listed units is section 197 (this was section 112), plus cess. A gold ETF suits someone who already has demat and wants grams they can sell without a shop. It is a poor fit if you want to wear the gold.