Guide
Silver ETF vs physical silver
You can own silver as metal in a locker or as units in a demat account. The price exposure is the same; the costs, tax and convenience are not.
On this page
Side by side
| Compared | Silver ETF | Physical silver |
|---|---|---|
| What you own | Units backed by vaulted bars | Bars, coins or jewellery |
| GST on purchase | None | 3% |
| Making charges | None | Low on bars; high on jewellery |
| Ongoing cost | Expense ratio, typically under 1% a year | Locker or insurance, if any |
| Minimum investment | One unit, often under ₹200 | A coin or small bar |
| Selling | On the exchange during market hours | To a jeweller or dealer, below the day's rate |
| Purity risk | None | Yes: check the hallmark |
| Long-term gains tax | 12.5% after 12 months | 12.5% after 24 months |
What the price includes
Silver ETFs value their holdings at the domestic price of silver, which includes import duty. They don't carry GST. Physical silver bought from a jeweller includes both, so today's 999 rate of ₹2,18,319 per kg includes ₹6,359 of GST that an ETF buyer doesn't pay.
The catch with ETFs
An ETF's market price can drift away from the value of its silver (the NAV). In October 2025, when physical silver was scarce in India, several silver ETFs traded well above NAV and some fund houses paused lump-sum investments into their silver fund-of-funds. Buying at a big premium means losing money if it disappears. Check the indicative NAV (iNAV) on the fund's website before buying.
Which suits you?
- Choose an ETF if you are investing for returns, want to buy small amounts regularly, or don't want storage worries.
- Choose physical for gifting, festivals, family use, or if you want metal you can hold without a broker.
Estimate the tax on a sale with the capital gains tax calculator.
Frequently asked questions
Are silver ETFs backed by real silver?
Yes. SEBI rules require silver ETFs to invest at least 95% of their assets in physical silver and silver-related instruments. The silver is held in vaults by a custodian.
Do I need a demat account for a silver ETF?
Yes, to buy ETF units on the stock exchange. Without one, you can invest through a silver fund-of-funds, which buys ETF units on your behalf and allows SIPs. Fund-of-funds units are unlisted, so they become long-term only after 24 months.
How is a silver ETF taxed in India?
Units held for more than 12 months are taxed at 12.5% on gains, without indexation. Units held for 12 months or less are taxed at your income-tax slab rate.
Sources
Rules and figures checked on 29 September 2026. Live prices update on this page automatically.