Stamp Duty on Mutual Fund Investors from July 1st, 2020
July 1st onwards there would be changes made to the stamp duty on
financial securities. The government has recently made a press release regarding
the changes that were to be made regarding
the stamp duty. These changes were
supposed to be made in January but got deferred to April and then July. From 1st
July onwards you will have to pay 0.005
percent of stamp duty on purchase of mutual
fund units. Its main implication would be when you purchase mutual fund
units in lumpsum, SIP or STPs. This means that purchasing mutual funds for
short duration would become costlier.
us take an example to understand it better.
you purchase mutual fund units worth Rs. 1 lakh then the mutual fund company
will issue you units for Rs. 99,995 and charge Rs. 5 towards paying the stamp
duty. The stamp duty with different rates applies to all categories of funds
like debt, gold, equity and hybrid.
Every Investor Will Have To Bear Stamp Duty
large investor purchases exchange-traded funds from a fund house, the stamp
duty payable would be 0.005 percent.
Similarly, ETF units that are bought from the stock exchanges will face stamp
duty at the rate of 0.015 percent. If
the units are issued to the investors under the dividend reinvestment plan, stamp duty would also apply to them. Dividend paid to the investor by the
company would be treated as consideration
and stamp duty on them would be taken from fund house out of the dividend
amount before investors are issued with the units.
On redemption of your investments, no stamp duty is applicable. Also when
the investor converts his physical
holdings into demat mode, no stamp duty is charged.
What is Stamp Duty ?
duty is a one-time charge. The value
of stamp duty is computed on the total
value of the transaction. Therefore, if the investment period is very
short, your returns will take a hit because of the stamp duty. As per the press
note released by , the stamp duty of 0.005 percent
will have an annualized impact of 1.82
percent on the investment that is made for one day. When the same
investment is held for one month, the cost comes down to 0.06 percent.
would not be wrong to say that the long
term investors will be least
impacted with the stamp duty. The major
impact of the new stamp duty would be on the large investors who often invest in mutual funds for a day or two.
funds are known for giving good returns to the investors if held for the long
term. If you are a newbie in the market or want to invest in mutual funds, you
can visit Indira
Securities. We will assist you in picking the best
mutual fund plan after understanding your financial needs and goals.