Investment & Financial Planning

Difference Between Gold ETF vs Gold Mutual Fund for NRIs

autohr img By Manish Prajapat | Last Updated : 06 Dec, 2025

Difference Between Gold ETF vs Gold Mutual Fund for NRIs
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An NRI can invest in gold in India through Gold ETFs (Exchange-Traded Funds) and Gold mutual funds using their NRE or NRO accounts. Gold ETFs track the performance of gold. It requires a demat and trading account and is traded on stock exchanges, offering high liquidity.

They invest in gold directly by purchasing bullion or futures contracts. Gold ETFs are ideal for investors seeking a convenient, liquid, and low-cost way to gold for portfolio diversification. 

On the other hand, gold mutual funds don't need a demat account and can be purchased through easy SIPs, making them suitable for long-term and disciplined investment. A gold mutual fund is an ideal way for investors to invest in gold and diversify their portfolios. 

Keep reading this blog to learn more about the differences between gold ETFs and gold mutual funds for NRIs. 

Key Takeaways
  • Gold ETFs are listed on Indian stock exchanges, and units can be purchased just like equity shares.
  • Gold mutual funds are open-ended mutual fund schemes that invest in gold ETFs as the underlying asset. 
  • Gold ETFs are ideal for those NRIs who prefer transparent pricing, have a
  • and trading account, and stay in the UAE, Europe, or the UK. 
  • Gold mutual funds are suitable for those who don't have a demat account, want a simple investing method, and live in the USA or Canada. 

How do Gold ETFs and Gold Mutual Funds Work for NRIs?

Both gold ETFs and Gold mutual funds allow NRIs to invest in gold without actually purchasing physical metal. However, the way both of these operate is different. Here's how:

Gold ETFs (Exchange Traded Funds)

Gold ETFs are listed on Indian stock exchanges, and you can purchase units just like equity shares. Each unit that you purchase will represent fixed grams of gold, backed by physical bullion.

Follow these steps to invest in gold ETFs for NRIs:

  • Open an NRE/NRO, demat, and a trading account
  • Adhere to the rules of FEMA regulations (Foreign Exchange Management Act)
  • Check and ensure whether the broker allows NRI participation. 

Gold ETFs for NRIs offer several benefits, such as high liquidity, transparent pricing, and negligible price fluctuations. 

Gold ETFs vs Gold Mutual Funds

Gold Mutual Funds 

Gold mutual funds are open-ended mutual fund schemes that invest in gold ETFs as the underlying asset. 

Consider the following steps to invest in gold mutual funds for NRIs:

  • Open an NRE/NRO bank account
  • Ensure compliance with the KYC, FATCA, and CRS requirements. 

A demat account for NRIs is not required to invest in gold mutual funds. Additionally, the NAV (Net Asset Value) shifts based on the price of gold ETFs after fund charges. 

NRIs who are not permitted to open a trading/demat account in their country of residence (USA, Canada, and restrictions at some AMCs), gold mutual funds are a convenient option for them. 

What are the Key Differences Between Gold ETFs vs Gold Mutual Funds?

Here is a table highlighting the main differences between gold mutual funds and gold ETFs to help you decide which gold investment will suit you better:

Feature Gold Mutual Funds Gold ETFs
Meaning  Gold mutual funds invest in gold or assets related to gold, like gold ETFs, gold producers, and mining companies.  Gold ETFs are instruments that track the performance of gold. It invests in gold by purchasing bullion or futures contracts. 
Account Requirement These funds don't need a demat account. Only an NRE/NRO bank account is needed.  It requires a demat and trading account. 
Liquidty It is moderate and can be redeemed after the market closes.  It is highly liquid and is traded at any time during market hours. 
SIP  You can invest in gold mutual funds through a systematic investment plan (SIP). You cannot invest in gold ETFs through SIPs as the units of ETF must be bought with a lump sum payment. 
Costs  Gold mutual funds have higher costs, like entry and exit loads. No entry or exit loads apply to gold ETFs. However, demat and brokerage charges are applicable. 
Taxability Long-term capital gains and taxes applicable to jewelry are charged on gold mutual funds.  These are subject to long-term capital gains and are exempt from VAT and securities transaction tax. 
Restrictions  Some AMCs (Asset Management Companies) restrict US/Canadian NRIs  Some brokers restrict US/Canada NRIs

What does this mean for NRIs:

  • Gold mutual funds are ideal if your country doesn't allow NRIs to invest in Indian markets.
  • If you want low-cost investing and a faster exit, gold ETFs are the choice. 

What are the FEMA and RBI Rules that NRIs Must Follow?

The FEMA (Foreign Exchange Management Act) governs gold investing in India, and NRIs need to adhere to the banking and repatriation rules:

  • Correct Bank Account Usage 

An NRI can invest in gold through:

  • NRE account (fully repatriable)
  • NRO account (repatriation capped at 1 million USD per year)

FCNR deposits are not allowed to buy gold ETFs or gold mutual funds directly. Additionally, you cannot use direct foreign currency for investment; the money must flow through an NRO/NRE account in Indian Rupees. 

  • Complying with the Repatriation Limit 

Investment made to an NRE account can be repatriated without any limits. On the other hand, investment made to an NRO account has a limit on the repatriation amount as well as a tax clearance requirement. (Form 15CA/CB). 

  • NRI Restrictions in the US and Canada 

Fresh investments from the NRIs in the US/Canada are not allowed by some funds due to the rules of FATCA (Foreign Account Tax Compliance Act). This is applicable more to mutual funds than ETFs. 

You can avoid a penalty and keep your investment valid by following the rules of FEMA. 

NRI Taxation: Gold ETFs & Gold Mutual Funds

How are Gold ETFs and Gold Mutual Funds Taxed for NRIs?

Gold ETFs and gold mutual funds are taxed similarly under Indian laws:

Short-Term Capital Gains (STCG)

  • A holding period of less than three years.
  • Tax is added to your income
  • For NRIs, TDS is applicable at the slab rate, provided if invested through NRO. 

Long-Term Capital Gains (LTCG)

  • A holding period of more than 3 years.
  • It is taxed at 20% with indexation.
  • Indexation helps in reducing the taxable portion by inflation adjustment.

TDS For NRIs 

  • TDS applies automatically on redemption if invested using an NRO account.
  • For NRI investments (fully repatriable), taxation applies unless you are protected under the DTAA tax treaty. 

Benefits of DTAA 

  • NRIs may qualify to reduce their tax return based on their country of residence. You can avoid paying taxes twice on the same income by:
    • Obtaining a TRC 
    • Filing Form 10F
    • Providing a self-declaration. 
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Which is Better Between Gold ETFs and Gold Mutual Funds for NRIs?

Consider the following factors to choose between gold ETFs vs gold mutual funds based on your investment needs:

Choose Gold ETF 

You should opt for a gold ETF if you are an NRI who:

  • Prefers transparent pricing
  • Wants low expense ratios and high liquidity
  • Hold an operational demat as well as a trading account
  • Stay in a country where there are no restrictions on investments

It is ideal for NRIs staying in the UAE, Singapore, the UK, Europe, and Australia. 

Choose Gold Mutual Funds

Go for gold mutual funds if you are an NRI who:

  • Do not have a demat account
  • Wants a simple, automatic investing method (SIP)
  • Prefers fund-managed convenience over self-trading
  • Lives in the USA or Canada (where ETF/stock restrictions are common)

These investments are ideal for US/Canada NRIs, beginners, and passive investors. 

Final Thoughts 

Both gold ETFs and mutual funds offer various benefits appealing to different types of investors. The choice between these two investment options depends on several factors, like your trading style, investment amount, flexibility, and management preferences. Stock market-savvy investors typically get attracted towards ETFs, while gold mutual funds are ideal for investors who value structured and professional management. 

If you are still confused about making a choice and the tax obligations associated with the investment. Then, you must seek assistance from an expert at Savetaxs. We have a team of experts who have been serving NRIs with the best taxation consultancy services. You can stay confident with your tax obligations while investing in gold as an NRI in India with the help of our experts. Contact us right away. 

Note: This guide is for information purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult either a CA, CS, CPA or a professional tax expert from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.

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Manish Prajapat (Tax Expert)

Mr Manish is a financial professional with over 10 years of experience in strategic financial planning, performance analysis, and compliance across different sectors, including Agriculture, Pharma, Manufacturing, & Oil and Gas. Mr Prajapati has a knack for managing financial accounts, driving business growth by optimizing cost efficiency and regulatory compliance. Additionally, he has expertise in developing financial models, preparing detailed cash flow statements, and closing the balance sheets.

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Frequently Asked Questions

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Ans: Gold ETFs in India are taxed depending on the holding period for NRIs. Capital gains acquired from short-term holdings are taxed at the income tax slab rate, while long-term gains are taxed at a flat rate of 12.5% without indexation.

Yes, Non-Resident Indians (NRIs) can buy digital gold in India using various online platforms.

An NRI can invest in gold ETFs either through an NRE or an NRO account, depending on the need for repatriation. An NRE account allows unlimited repatriation of the investment's proceeds, while an NRO account has limits on the repatriation amount, which is $1 million per financial year.

An NRI should generally hold 5-15% of their portfolio in gold, based on their risk profile, with a 5-10% allocation often considered ideal for balancing stability and growth.

International gold ETFs like GLD are more than Indian Gold ETFs for NRIs due to broader market access and potentially lower expense ratios.

Yes, digital gold is taxed in India just like physical gold. The taxes include the Goods and Services Tax (GST) while purchasing the gold and the capital gains tax while selling it.

Gold investments are not entirely tax-free. However, Sovereign Gold Bonds (SGBs) are mostly a tax-free gold investment, as capital gains are exempt from tax if held until maturity (eight years).

Yes, TDS is deducted on the purchase of physical gold in India. However, it depends on specific conditions related to the buyer's turnover and the purchase value.

NRIs can invest in gold in India using digital gold, gold-exchange traded funds (ETFs), gold mutual funds, and physical gold like coins, bars, and jewelry.

The choice between physical gold and digital gold depends completely on your investment goals, priorities, and preferences.