The stamp duty charge is due to an amendment in The Indian Stamp Act,1899 by Finance Act 2019. It requires collection of stamp duty on all securities market instruments, including mutual funds. It was originally effective from 9-Jan-20, but government later postponed it to be effective from 1-Jul-20.
Is this applicable for all MFs?
- Yes, it is applicable for all MFs (including ETFs).
- Applicable for units held in both Physical or Demat form.
- Applicable on all purchase transactions includinng SIPs, lumpsums, dividends reinvested and switch-ins.
- Transfer of units from one demat to another demat account including market / off-market transfers will also attract stamp duty.
- Applicable even for liquid schemes and STPs from Liquid.
- Not applicable for redemption/SWPs.
Yes, it will be applicable for all SIPs, including those registered earlier. Every installment will have this flat rate of duty.
Dividend Re-investments and switch-ins will attract stamp duty. For dividend reinvestment the calculation of stamp duty will be on the dividend declared less the TDS if any.
The charges will be 0.005% for purchase and switch-ins as well as dividends reinvested. The duty will be calculated on the investment amount less any transaction charge. Units will be allotted only after deducting stamp duty. For eg if you invest Rs 1 lakh, Rs. 5 will be taken as stamp duty and the rest Rs. 99995 /- will be used for buying units.
It doesn’t impact Retail clients much, but for corporates who invest for say less than few months, this will have an impact on their returns.
Happy Investing!
R♥Vi
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