For decades, Indian investors who wanted exposure to silver had only one option: buy the physical metal in the form of coins, bars, or jewellery. While physical silver remains popular, it comes with practical challenges such as storage costs, purity concerns, and liquidity constraints. Silver Exchange-Traded Funds, or silver ETFs, have emerged as a modern alternative that addresses many of these issues. Launched in India starting in 2022, silver ETFs allow you to invest in silver through your regular demat and trading account, just like buying shares of a company. This guide explains everything you need to know about silver ETFs in India.

What Are Silver ETFs and How Do They Work?

A silver ETF is a mutual fund scheme that is listed and traded on a stock exchange. Each unit of a silver ETF represents a specific quantity of silver, and the fund's value moves in line with the domestic price of silver. The fund house purchases and holds physical silver (or silver-related instruments) on behalf of investors, and you can buy and sell units of the ETF on the NSE or BSE during market hours.

The mechanism is straightforward. An Asset Management Company (AMC) creates the ETF by purchasing physical silver of 999 purity and storing it in secure vaults maintained by custodian banks. The price of each ETF unit is derived from the prevailing silver price and is updated throughout the trading day. When you buy a silver ETF unit, you are effectively owning a proportional share of the physical silver held by the fund, without ever needing to take delivery of the metal.

Silver ETFs in India are regulated by the Securities and Exchange Board of India (SEBI) and must follow strict guidelines regarding the quality of silver held, custodian arrangements, and disclosure norms. This regulatory oversight provides an important layer of investor protection that is absent in the unorganised physical silver market.

Silver ETFs Available in India

Since the first silver ETF was launched in India in early 2022, several fund houses have entered the space. Here is an overview of the prominent silver ETFs available to Indian investors.

ICICI Prudential Silver ETF: One of the early entrants, this fund tracks the domestic price of silver and has built a substantial asset base. It benefits from ICICI Prudential's extensive distribution network and brand recognition.

Nippon India Silver ETF: Managed by Nippon India Mutual Fund, this ETF has consistently maintained tight tracking of silver prices. It is among the more liquid silver ETFs on the exchange, with healthy daily trading volumes.

HDFC Silver ETF: Backed by the HDFC AMC brand, this fund offers competitive expense ratios and strong custodian arrangements for the underlying physical silver.

Kotak Silver ETF: Kotak Mahindra Mutual Fund's silver ETF is another solid option with competitive costs and reliable tracking accuracy.

Aditya Birla Sun Life Silver ETF, Tata Silver ETF, and others: Multiple other fund houses including Aditya Birla Sun Life, Tata, DSP, and Axis have also launched silver ETFs, giving investors a wide selection to choose from.

When comparing silver ETFs, the most important factors to evaluate are the expense ratio, tracking error (how closely the ETF follows actual silver prices), trading volumes on the exchange (which affect liquidity), and the fund's asset size. Use our free silver price calculator to compare the current silver spot price with ETF unit prices and assess any premiums or discounts.

Advantages of Silver ETFs Over Physical Silver

Silver ETFs offer several compelling advantages that make them attractive to modern investors.

No Storage Worries: Physical silver is bulky. Storing a significant investment in silver bars or coins requires a bank locker or a home safe, both of which come with ongoing costs and security risks. With silver ETFs, the fund house handles storage in professional-grade vaults, and the cost is built into the expense ratio.

Guaranteed Purity: When you buy silver from a local jeweller, there is always some risk of receiving metal that is less pure than claimed, particularly from non-hallmarked sources. Silver ETFs hold only 999-purity silver verified by authorised assayers, eliminating purity concerns entirely.

High Liquidity: Selling physical silver can be inconvenient. You need to find a buyer, negotiate the price, and potentially accept a discount to the spot price. Silver ETFs trade on the stock exchange, so you can sell your holdings instantly at the prevailing market price during trading hours.

No Making Charges or GST on Purchase: Physical silver, especially jewellery, carries making charges and 3% GST. Silver ETF transactions on the exchange attract only standard brokerage and securities transaction tax, which are typically much lower than the combined making charges and GST on physical silver.

Fractional Investment: You can invest in silver ETFs with very small amounts, as units are available for as little as the price equivalent of one gram of silver. This makes systematic and gradual investment possible, unlike physical silver where practical minimum purchases are higher.

Expense Ratios and Tax Treatment

Every ETF charges an annual expense ratio that covers the fund's management, storage, insurance, and administrative costs. For silver ETFs in India, expense ratios typically range from 0.30% to 0.65% per annum. This fee is deducted from the fund's net asset value (NAV) on a daily basis, so you do not pay it separately. While a fraction of a percent may seem small, over long holding periods it compounds, so choosing a fund with a lower expense ratio can meaningfully improve returns.

The tax treatment of silver ETFs is an important consideration for investors. Silver ETFs are classified as non-equity mutual fund schemes for tax purposes. As per the prevailing tax rules, gains from silver ETFs held for more than three years are not treated as long-term capital gains with indexation benefit, as was the case before the 2023 amendments. Currently, gains from silver ETFs (regardless of holding period) are added to your income and taxed at your applicable income tax slab rate. This makes the tax treatment of silver ETFs similar to that of physical silver and silver futures. Investors in higher tax brackets should factor this into their return calculations.

It is always advisable to consult a qualified tax professional for the most up-to-date treatment of your specific situation, as tax laws are subject to change through annual Finance Acts and CBDT notifications.

How to Buy Silver ETFs Through Your Demat Account

Investing in silver ETFs is as simple as buying shares on the stock market. Here is a step-by-step process.

Step 1: Open a Demat and Trading Account. If you do not already have one, open a demat and trading account with a SEBI-registered stockbroker. Most major brokers such as Zerodha, Groww, Angel One, ICICI Direct, and HDFC Securities support silver ETF trading. The account opening process is fully digital and typically takes one to two business days.

Step 2: Add Funds. Transfer money to your trading account through UPI, net banking, or any other supported method.

Step 3: Search and Buy. Log in to your broker's trading platform, search for the silver ETF you wish to buy by its ticker symbol (for example, ICICISLVR, NIPSILVER, or HDFCSILVER), check the current market price, and place a buy order. You can place a market order for instant execution or a limit order at your desired price.

Step 4: Monitor Your Holdings. Once purchased, the ETF units appear in your demat account. You can track their value in real time through your broker's app or website. When you wish to sell, simply place a sell order during market hours.

For investors who prefer a systematic approach, some fund houses also offer Silver Fund of Funds (FoFs) that invest in the silver ETF. These FoFs allow you to set up a Systematic Investment Plan (SIP) without needing a demat account. However, FoFs carry an additional layer of expense ratio on top of the underlying ETF's charges.

Conclusion

Silver ETFs have democratised silver investing in India by removing the barriers of storage, purity verification, and liquidity that have long been associated with physical silver. They offer a transparent, regulated, and cost-efficient way to gain exposure to silver price movements. Whether you are a seasoned investor looking to diversify your portfolio with precious metals or a newcomer taking your first step into silver, ETFs provide a practical and accessible route. Compare the available options based on expense ratios, tracking accuracy, and liquidity, and start with an amount you are comfortable with. Keep an eye on daily silver prices on our homepage to time your investments wisely.