What are Silver ETFs?
- 20th January 2026
- 02:00 PM
- 9 min read
What is a Silver ETF and How Does It Work in India?
Silver has evolved from a traditional festival purchase into a serious investment asset, driven by rising industrial demand from EVs and 5G. As prices touched new highs in early 2026, investors are increasingly turning to Silver ETFs to gain exposure without storage risks or making charges. This article explains how Silver ETFs fit into portfolios under the new tax regime.
What Is a Silver ETF?
A Silver Exchange Traded Fund (ETF) is a passive investment scheme that trades on the stock exchange (NSE/BSE) just like a share. When you buy a unit of a Silver ETF, you are essentially buying a digital certificate backed by physical silver.
Silver ETF Purity Rules in India
As per SEBI regulations, Silver ETFs must invest at least 95% of their net assets in physical silver or silver-related instruments. This physical silver is stored in secure vaults by a custodian (like JPMorgan or Brinks) appointed by the fund house. The silver bars must meet the London Bullion Market Association (LBMA) good delivery standards, ensuring 99.9% purity.
Unlike digital gold wallets offered by payment apps, Silver ETFs are strictly regulated by SEBI, offering a higher layer of safety and transparency. You don’t own the bar directly, but you own a unit that tracks its price.
Silver ETF Unit Size: How Much Silver Does One Unit Represent?
For most Indian Silver ETFs, 1 unit is approximately equal to 1 gram of silver.
- Example: If the price of silver is ₹2,30,000 per kg (as seen in early 2026 market rallies), the price of 1 gram is roughly ₹230. Therefore, the ETF unit will trade on the exchange at approximately ₹230.
How Does a Silver ETF Work?
The mechanism is simple but robust, involving three key players: the Investor, the Fund House (AMC), and the Authorized Participants (APs).
| Step | Action | What Happens Behind the Scenes? |
| 1. Buying | You buy 100 units of a Silver ETF on NSE via your broker (e.g., PL Capital). | You pay cash. The Fund House uses this cash to buy ~100g of physical silver bars. |
| 2. Storage | The transaction settles in T+1 days. | The physical silver is deposited into a secure, insured vault. The units are credited to your Demat account. |
| 3. Tracking | Silver price moves from ₹230 to ₹240. | The NAV (Net Asset Value) of your ETF unit rises to reflect this gain, minus a small expense ratio. |
| 4. Selling | You sell your units on the exchange. | You receive cash. The Fund House may sell the corresponding silver to pay you (if net redemptions occur). |
Silver ETF vs Physical Silver
Why switch from the traditional chandi coins to an ETF? The answer lies in cost and efficiency. Here is the reality check for 2026:
| Feature | Silver ETF | Physical Silver (Coins/Bars) |
| Purity | Guaranteed 99.9% (LBMA Standard). | Varies; Risk of impurities from local jewellers. |
| Pricing | Transparent; Tracks real-time international prices. | Opaque; Varies by jeweller |
| Making Charges | Zero; You only pay brokerage (often minimal). | High; Typically, 10-20% wasted on making & polishing charges. |
| Storage | Free & Safe; Held electronically in Demat. | Risky & Costly; Risk of theft and bank locker charges apply. |
| Liquidity | High; Can be traded instantly on NSE/BSE during market hours. | Low; Jewellers may deduct 5-10% when buying back. |
| GST | None on buying units (GST applies only on brokerage). | 3% GST applies on the full value of silver purchased. |
Expert Insight: “When you buy physical silver, you often lose 15-20% upfront in making charges and GST. With an ETF, your cost of entry is negligible, allowing your investment to compound immediately.”
Top Silver ETFs in India
Several fund houses offer Silver ETFs. Since they all track the same underlying asset, your choice should be driven by AUM and Expense Ratio.
Below is a snapshot of the leading funds as of 9th January 2026.
| ETF Name | AUM (₹ Cr)* | Expense Ratio* | Approx NAV (₹) | Ticker Symbol |
| Nippon India Silver ETF | ~28,944 | 0.56% | ~230.24 | SILVERBEES |
| ICICI Prudential Silver ETF | ~14,827 | 0.40% | ~240.17 | SILVERIETF |
| HDFC Silver ETF | ~6,074 | 0.45% | ~230.65 | HDFCSILVER |
| Aditya Birla Sun Life Silver ETF | ~2,004 | 0.35% | ~226.00 | BSLSILVER |
With inputs from: Valueresearch / AMFI data as of January 9, 2026. AUM and NAVs are subject to market changes.
Taxation Explained
This is the most critical section for your financial planning. The Finance Act 2024 (effective July 23, 2024) completely overhauled the taxation of Silver ETFs, making them far more attractive than before.
- Short-Term Capital Gains (STCG)
- Condition: If you sell your silver ETF units within 12 months of purchase.
- Tax Rate: The gains are added to your annual income and taxed as per your income tax slab.
- Long-Term Capital Gains (LTCG)
- Condition: If you hold the units for more than 12 months.
- Tax Rate: 12.5% flat (without indexation benefits).
Why this matters: Previously, Silver ETFs were treated like debt funds, taxed at slab rates unless held for 36 months. The reduction of the holding period to 12 months and the fixed 12.5% rate is a massive advantage for investors in the 30% tax bracket.
Example: You invest ₹1 Lakh in Jan 2025. You sell in Feb 2026 for ₹1.5 Lakh (profit ₹50,000).
– Old Rule: You would pay ₹15,000 tax (30% slab).
– New Rule: You pay only ₹6,250 (12.5% of ₹50,000).
– Savings: ₹8,750.
Risks of Investing in Silver ETFs in India
While Silver ETFs solve storage issues, they carry market risks. Silver is known as a “high-beta” version of gold.
- Volatility Impact: Silver is heavily used in industries (solar panels, EVs, electronics). A slowdown in global manufacturing can crash silver prices even if gold remains stable. Conversely, industrial booms can cause massive rallies (like the one seen in late 2025).
- Currency Risk: Since domestic silver prices are derived from international dollar prices, a strengthening Rupee can eat into your returns, while a weak Rupee boosts them.
- Tracking Error: The ETF returns may slightly lag actual silver prices due to the expense ratio and cash holdings. As of Jan 2026, tracking errors for top funds generally range between 0.3% to 0.6%.
Key Takeaways
- Digital is Smarter: Silver ETFs eliminate making charges, storage costs, and purity risks associated with physical silver.
- Tax Efficiency: Holding for just 12 months qualifies you for a lower 12.5% LTCG tax rate (down from slab rates).
- Affordable Entry: You can start investing with the price of just 1 unit (approx ₹230-240).
- Liquidity: You can sell your holdings instantly on the stock exchange, unlike selling silverware to a pawnbroker.
- Industrial Play: Investing in silver is an indirect bet on the green energy (solar/EV) boom in India.
How to Start Investing in Silver ETFs in India
Setup & Selection
– Open a Demat account if you haven’t already.
– Compare the Expense Ratio and Liquidity of Nippon, ICICI, and HDFC Silver ETFs.
– Add the ticker symbol (e.g., SILVERBEES) to your watchlist.
Initial Allocation
– Allocate 5-10% of your portfolio to precious metals (Gold + Silver).
– Buy your first tranche. Avoid lump sums; silver is volatile.
Automate
– Set up a Stock SIP to buy a fixed number of units (e.g., 20 units) every month to average out your buying price.
Conclusion
Silver ETFs have democratized access to precious metals for Indian investors. They offer a clean, cost-effective, and tax-efficient way to ride the potential of the “poor man’s gold.” With the new 12.5% LTCG tax rule kicking in after just 12 months, the case for holding Silver ETFs over physical bars is stronger than ever. Whether you are hedging against inflation or betting on the solar boom, these funds deserve a slice of your portfolio.
Ready to diversify your portfolio? Open your PL Capital account and start investing in Silver ETFs today.
FAQ Section
What is Silver ETF and how is it taxed in India?
A Silver ETF is a stock-market-listed fund that tracks the price of physical silver. As per Finance Act 2024, if held for more than 12 months, gains are taxed at 12.5% (LTCG). If held for less than 12 months, gains are taxed at your income slab rate.
Can I convert my Silver ETF units into physical silver?
No, you cannot convert ETF units into physical silver directly. When you sell your units on the exchange, you receive cash (rupees) in your trading account. Physical delivery is generally restricted to Authorized Participants dealing in large bulk quantities (e.g., 30kg bars).
What is the minimum investment for a Silver ETF?
The minimum investment is one unit. As of January 2026, the price of one unit is approximately ₹230 to ₹240, depending on the specific ETF and current market rates. This allows investors to start with a relatively small investment amount.
Which is better: Silver ETF or Silver Fund of Funds (FoF)?
Silver ETFs are better for investors with Demat accounts due to lower expense ratios (0.40-0.56%). Silver FoFs are for those without Demat accounts who want to invest via SIPs in mutual funds, but they carry a slightly higher expense ratio.
Is Silver ETF safe for long-term investment?
Yes, from a regulatory perspective, they are safe as they are SEBI-regulated and backed 95% by physical silver in vaults. However, silver prices are volatile. It is suitable for long-term investors willing to accept higher risk than gold for potentially higher returns.
