What is a gold ETF in India?
Quick Answer: A gold ETF is a mutual fund scheme that invests at least 95% of net assets in gold and gold-related instruments. Its units are listed on a stock exchange and trade like shares. SEBI requires the physical gold to be 99.5% pure bars meeting LBMA Good Delivery standards, verified by auditors every six months.
Through a gold exchange traded fund, an investor gets a claim on gold held by a mutual fund, without taking delivery of bars or coins. In India the product sits inside the mutual fund framework. That means SEBI decides what the fund may own, how its gold is priced and how it is checked.
Those rules were rewritten in 2026. New SEBI mutual fund regulations and a new income tax law both took effect on 1 April 2026, and each changes how a gold ETF is regulated and taxed.
What is a gold ETF?
A gold ETF is a mutual fund scheme that invests primarily in gold or gold-related instruments, as defined in regulation 2(u) of the SEBI (Mutual Funds) Regulations, 2026. Its stated objective is to track the price of physical gold in domestic terms, subject to tracking error.
SEBI's master circular for mutual funds, updated to 20 March 2026, sets the asset rule: at least 95% of net assets in gold and gold-related instruments. The gold must be standard bars of 995 parts per thousand fineness. Those bars must also conform to London Bullion Market Association Good Delivery standards.
SEBI permits only a short list of gold-related instruments. The regulator designates bank gold deposits under the 1999 scheme, the Gold Monetization Scheme, 2015 and exchange-traded commodity derivatives with gold as the underlying.
How does a gold ETF work in India?
In India, a gold ETF pools investor money, buys gold bars, stores them through a custodian arrangement and issues units whose value moves with the metal. Regulation 41(4) confines the money to gold or gold-related instruments, apart from what is needed to meet redemptions.
Derivatives and deposits are allowed only within limits. Gold deposit schemes, the monetisation scheme and gold commodity derivatives together may not exceed 50% of net asset value, and the two deposit schemes are capped at 20% within that. Cash awaiting deployment can sit in short-term deposits with scheduled commercial banks.
Checks run on a fixed calendar, with statutory auditors physically verifying the gold every half year and reporting to the trustees, who confirm it in their half-yearly report to SEBI. Storage and handling of the gold is an expense the scheme may charge, inside the 0.90% base expense ceiling for ETFs.
How are gold ETFs taxed in India in 2026?
From 1 April 2026, gold ETF units are taxed under the Income-tax Act, 2025: long-term after 12 months at 12.5%, and short-term gains at normal slab rates.
Tax treatment of gold holdings, tax year 2026-27 (Income-tax Act, 2025, sections 2(101), 76 and 197; as of 22 September 2026)
| Gold holding | Long-term after | Long-term rate | Short-term gains |
|---|---|---|---|
| Gold ETF units (listed) | 12 months | 12.5% (s.197) | Normal slab rates |
| Gold fund of funds units (unlisted) | 24 months | 12.5% (s.197) | Normal slab rates |
| Physical gold | 24 months | 12.5% (s.197) | Normal slab rates |
Section 2(101) of the Income-tax Act, 2025 is the source of the 12-month test, and it applies that test to any security listed on a recognised stock exchange in India. Mutual fund units are securities under the Securities Contracts (Regulation) Act, 1956. Gold ETF units are listed.
In tax terms, a gold ETF is neither an equity-oriented fund nor a specified mutual fund. Section 76 reserves the specified mutual fund label for funds that put more than 65% into debt and money market instruments. The definition was revised after the Finance (No. 2) Bill, 2024 memorandum noted that the older test had caught gold ETFs and gold mutual funds.
Gold ETF vs physical gold: what is different?
The key differences are audited purity, pricing and tax timing: gold ETF units turn long-term after 12 months, physical gold after 24.
The clock on physical gold was itself cut in 2024. The Finance (No. 2) Bill, 2024 memorandum reduced the holding period for gold from 36 months to 24 and removed indexation, effective 23 July 2024. The 2025 Act keeps both positions.
Pricing works differently too. A gold ETF's NAV is struck to four decimal places using polled spot prices that recognised stock exchanges publish to settle physically delivered gold derivatives, a method SEBI set by circular on 26 February 2026. Physical gold has no single published NAV. Its price depends on the seller.
Costs sit in different places, since a gold ETF charges storage and custody inside its expense ratio while physical gold carries whatever storage or locker cost the owner takes on. For how trade policy hit the physical market this year, see our note on India's gold imports after the 2026 duty hike.
What is a gold ETF fund of funds (FoF)?
A gold fund of funds is an open-ended scheme that invests in gold ETF units and deals with investors at NAV. Regulation 2(t) defines a fund of funds as a scheme investing primarily in other mutual fund schemes.
Its cost ceiling includes the underlying ETF, because regulation 66(7) caps a fund of funds that invests in ETFs at 0.90% of daily net assets, counting the weighted expense ratio of the ETFs it owns. The FoF values those ETF units at their exchange closing price.
Because the fund of funds is not listed, its units follow the 24-month test in section 2(101). Applications follow the normal 3:00 pm cut-off. Units can sit in a statement of account with no demat account needed, and Multibagg's portfolio dashboard can still show gold units beside other holdings once a broker is connected.
How is a gold ETF traded on the stock market?
Gold ETF units trade on the stock exchange during market hours through a stockbroker, at prices set by orders, with at least two appointed market makers quoting.
An indicative NAV is displayed by the exchange through the session, and for gold ETFs SEBI lets this iNAV be static or dynamic, based on the latest gold price data available. Instrument pages such as Nippon India ETF Gold BeES on Multibagg show the traded price beside NAV and expense ratio.
Large orders have a second route, where authorised participants, market makers and large investors can create or redeem units with the fund in creation unit size, which each scheme discloses. Investors other than market makers can use that direct route only above ₹25 crore.
Gold ETF prices follow domestic gold, which can move sharply. For recent price action, see our note on gold's slide as MCX trading turned choppy.
Compare gold ETFs on one screen
Costs and tracking records differ across gold ETFs from different fund houses. Multibagg's ETF pages list the gold funds with the expense ratio and holdings for each, side by side.
Disclaimer: This article is for educational and informational purposes only. Multibagg AI is not a SEBI-registered investment adviser or research analyst, and it does not provide investment, financial, legal or tax advice. Nothing here is a recommendation to buy, sell, hold or invest in any security. Market data is shown as of the dates stated and may have changed since. Please consult a SEBI-registered adviser before making any investment decision.
Aaditya Aanand is the founder and CEO of Multibagg AI. An IIT Kanpur alumnus, he has worked across technology and financial markets at Goldman Sachs and American Express. His writing explores investing, markets and AI.