SEBI Halts Gold ETF FoF Inflows: What Investors Must Know

Mutual fund houses have suspended fresh investments into Gold ETF Fund of Funds following direct instructions from the Securities and Exchange Board of India. The restrictions began taking effect on October 16, 2026, prompting various asset management companies to issue notice-cum-addenda.

The regulatory pause applies exclusively to specific fund structures rather than direct exchange-traded products. For the affected schemes, fund houses implemented clear transactional limits:

Fresh and additional lumpsum investments are no longer accepted.

Switch-in requests from other schemes have been halted.

New SIP and STP registrations targeting these funds are blocked.

Existing investments in these schemes remain largely operational for redemptions and switch-outs. Investors holding units prior to the effective date can continue processing withdrawals according to standard scheme rules.

The Digital Gold Alternative and Hidden Costs

As traditional fund routes face regulatory curbs, investors are turning toward digital gold as a convenient substitute. This alternative allows users to purchase 24-carat gold online in small amounts while providers store the physical equivalent in insured vaults.

The product carries specific financial friction points that buyers must navigate carefully. Key cost factors include:

A 3% GST applies to all initial purchases.

A significant spread between buying and selling prices ranges from 2.5% to 5%.

Short-term gains face taxation at slab rates.

Long-term gains held over 24 months are taxed at 12.5% without indexation.

Digital gold remains largely unregulated and lacks the formal investor-protection mechanisms found in established securities markets. SEBI has previously warned that it is not a notified security or a regulated commodity derivative, leaving participants exposed to counterparty risks.