E-Gold Trading Basics

16 per cent is the average return given by e-gold in 2012 as compared to the 11 per cent average return from gold ETFs.

Brokerage: Trading in both gold ETFs and e-gold involves payment of a brokerage fee. For e-gold, it is 0.25 per cent of the purchase rate. The transaction fee for gold ETFs is Rs 1 per lakh compared to Rs 3.5 per lakh for equities.

Taxation: Gold ETFs have an edge over e-gold here. For gold ETFs, one year is considered as the long term; it is three years for e-gold. Also, e-gold attracts wealth tax.

E-gold is treated like physical gold and qualifies for long-term capital gains benefits if held for three years or more. However, gold ETFs qualify for long-term capital gains treatment after being held for just one year. Gold ETFs are considered financial assets and hence are exempt from wealth tax, which is not the case with e-gold.

Gains from gold ETFs, if sold within one year, are taxed according to the person's tax slab and at 20 per cent (after indexation) if sold after a year. Gains from e-gold, if it is sold within three years, are taxed according to the tax slab and at 20 per cent (after indexation) if sold after three years.

Indexation is adjusting the purchase price with inflation. It leads to a higher purchase price and lowers the tax liability. For instance, if inflation is 6 per cent and the investment is Rs 1,000, the inflation-adjusted price for taxation will be Rs 1,060. This will lower the capital gains. Market Timings: You can trade e-gold till 11.30 pm, while gold ETFs are available in the market only till 3.30 pm.