There is a new, convenient way of buying gold – you can buy online, any quantity and store in digital form in vaults. Paytm and Stockholding Corporation of India are providing this service where you can easily acquire the shiny yellow metal online. We explain how:
Your options for buying gold in India currently include:
This usually involves a trip to your nearest jeweller and then buying a gold bar or coin at a hefty premium. Assuming that you trust the jeweller and hence the gold’s purity, you still have to figure out where to store it. Doing so at home exposes it to theft. Doing so in a bank locker adds another layer of effort – open a locker, don’t lose the key, make trips to the bank.
You can do this in five ways.
- A gold ETF (Exchange Traded Fund) on a stock exchange will track the price of gold. This involves opening a demat and trading account first and then placing an order at the stock exchange. It involves paying annual demat fees and dealing with spam emails and calls from the broker about various stocks.
- Buying a gold mutual fund. This involves getting your mutual fund KYC done first and then filling another set of forms to invest in the fund itself. If you go through a distributor, you will also pay his or her commission along with the aforesaid forms.
- Sovereign Gold Bonds. These are issued by the Government and can be bought from your bank. They lock-in your gold for five years and will pay you an interest of 2.5% per annum. Buying them involves a trip to the bank and a filling up a set of forms.
- Commodity Exchanges: If you are a serious trader then you can approach gold through gold futures on commodity exchanges like the MCX. This will also require a trading account.
- Paytm and Stockholding Corporation of India – See below
What do you need for Paytm?
Unlike mutual funds where you need to provide a bunch of documents to get your KYC done and then fill another set of forms to actually invest, you just need a phone number to download a basic Paytm wallet. Norms are changing for these wallets also and this may not always be the case.
How do you buy gold on Paytm?
- Open the App from the comfort of your couch or bedroom. Tap on the gold icon.
- The price shown to you is valid for 6 minutes.
- Paytm offers several cash-back/special offers on gold purchases as well. Check which ones work best for you.
- Enter either an amount to invest eg: Rs 5 or Rs 200 or a physical quantity (this can be less than 1 gm also) of gold to buy and click on buy. GST of 3% will be levied on your gold purchase.
- You also need to enter your name and pin code to generate the receipt. Paytm will debit your wallet and credit an equivalent amount of gold.
Things to take note of:
You can also sell the gold back to Paytm through the app. However, trading gold through the app is not cost-efficient because there is a 3-4% difference between the buying and selling price in Paytm’s favour (called a ‘spread’). You also need to share your bank account details including IFSC code when you sell the gold.
If your cumulative purchases of gold exceed Rs 50,000, KYC norms become applicable. This is also true if a single purchase exceeds Rs 200,000. You will have to submit your PAN details.
If you want to trade gold, consider a gold ETF or even opening an account on a commodity exchange like MCX.
The gold you buy is stored in the vaults of MMTC-PAMP (A joint venture between the public sector MMTC and its Swiss partner PAMP) and can be left there for up to five years. After this period you need to either sell the gold back to Paytm or take delivery of the metal.
You have to keep the Paytm Gold account alive by transacting in at at least once in six months. If you don’t do so, the gold is sold at the prevailing selling price and the proceeds are transferred to a special GAP account maintained by MMTC-PAMP. You can collect it from MMTC-PAMP later by showing various types of ID proof.
Advantages of buying gold on Paytm
- Really low ticket size. You can invest as little as Re 1 in gold which you cannot through any of the other alternatives.
- Convenient. You don’t have to fill forms, meet agents or make trips to jewellers and banks.
- You can buy and sell gold at any time, even on public or bank holidays.
Disadvantages of buying gold through Paytm
- There is a huge spread between the buying and selling price. Even if you are not a trader, selling it after a few years to Paytm will cost you a hefty sum. Alternatively, you will have to take delivery of the physical metal and make a trip to a jeweller and pay his spread.
- You pay GST at 3%. There is no GST on Gold Mutual Funds or Gold ETFs. Ordinary stocks are subject to Securities Transaction Tax instead but this is not levied on Gold ETFs
Buying gold from Stockholding Corporation
You need to submit ID and address proof for opening an account with the public sector Stockholding Corporation of India. NRIs are eligible for this feature, unlike Paytm which does not offer the digital gold facility to NRIs. NRIs will have to submit a copy of their passport.
The gold you buy online from the Stockholding Corporation is stored in the vaults of MMTC-PAMP just as in the case of Paytm. At least one gold withdrawal has to be paid in every six month period. If your gold is less than one gram or in fractions of a gram, you can sell this fractional gold back to the Stockholding Corporation at the prevailing price.
You can buy gold worth Rs 1,000 and multiples of it, thereafter. If you want to take physical delivery of the gold, the minimum quantity is 1 gm. You can transact in gold any time of the day, any day of the year. Gold prices are quoted in rupees after converting the international dollar price of gold and updated daily.