Gold Exchange-Traded Funds:
A gold ETF, or exchange-traded fund, is a commodity ETF that consists of only one principal asset: gold. Exchange-traded funds act like individual stocks, and they trade on an exchange in the same manner. So, if you invest in a gold ETF, you won't own any gold. Even when you redeem a gold ETF, you do not receive the precious metal in any form. Instead, you as an investor will receive the cash equivalent.
Gold ETFs are traded in the same way as gold jewellery:
  1. If ETFs are held for the short-term, any capital gain arising on the sale of ETFs shall be taxable on the applicable income-tax slab rate of the taxpayer.
  2. If ETFs are sold in the long-run, any capital gain shall be taxed @20% with indexation or 10% without indexation.

Gold Sovereign Bond:

Gold sovereign bonds are issued by the government of India, at prices which are at par with physical gold prices. It carries a specific rate of interest which is generally paid half-yearly and has a tenure of 8 years. These bonds have the option of premature redemption, but only after 5 years.

One can purchase these bonds at a certain price from various post offices and banks. The minimum required investment is 2gm and the maximum being 500gm.

Any interest arising on these bonds shall be taxable as per the applicable slab rates of the taxpayer. If the investor sell-off these bonds on maturity and any capital appreciation thereon shall not be taxable. However, if these bonds are sold before maturity, the entire capital appreciation arising due to the sale shall be taxable as Long-term Capital Gain or Short-term capital gain, as applicable.