The implementation of the stamp duty was expected in January but postponed to April and then to July. Here's how it will impact MF investors.
Whom it’s applicable?
The stamp duty is applicable to all categories of investors including individuals, NRIs, corporates and non-individuals. It will be applicable to all categories of MF schemes related to equity, debt, liquid and more. An issue of units includes purchase, switch-in, and dividend reinvestment, whereas a transfer implies off-market transactions. Investors who issued units in liquid and overnight funds besides those short-term holding of fewer than 30 days are likely to be most affected.
What type of transactions will be impacted?
The stamp duty will be applicable to all kinds of mutual fund purchases, including lump sum, SIP, STP and dividend reinvestment.
Mutual Fund shall deduct the stamp duty from the subscription amount paid by the investor and allot units for the balance amount.
For instance, if you have invested Rs 1 lakh amount in MF and the transaction charge is Rs 100 then the net purchase cost is Rs 1,00,100. However, the stamp duty will be imposed on Rs 1 lakh and not on Rs 1,00,100. At 0.005 percent it will come to Rs 5.
It is applicable to direct and regular plans. Also, note for example if you have bought units of a fund of Rs1 lakh then Rs 5 will be deducted from the amount invested and you will be allotted units for Rs 99,995 only, as per the Morning Star analysis.
It is to be noted that the stamp duty is not applicable to the redemption of units or transfer of units from broker account to investor account as no consideration is involved. Retail investors are not typically invested in overnight funds and prefer liquid funds. It is most likely to impact the short holding periods of 90 days or less.
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