Beginning July 1, stamp duty will be levied on all mutual fund purchases. As per a leading business dailies report, the stamp duty implication on mutual funds was to come into effect from January but got postponed to April and then to July.
All mutual fund schemes i.e. both debt and equity funds would attract stamp duty charges but the impact would be more in case of debt funds that are held for a shorter tenure of 90 days.
Here is a lowdown on stamp duty on mutual fund investment:
- Stamp duty at the rate of 0.005% will be charged on purchase of all mutual funds. Mutual fund issuance includes purchase transaction, dividend re-investment and switch-in
- The charges become applicable in all modes of mutual fund investment i.e. in case of systematic investment plans (SIPs), systematic transfer plans (STPs), dividend reinvestment or if made in a lump sum amount.
- Stamp duty does not apply in case of redemption of mutual fund units. And thus is similar to entry load that was withdrawn in the year 2009 by the market watchdog SEBI.
- If there is transfer transaction being carried out then stamp duty at the rate of 0.015% will apply. Notably, transfer of units is an off-market transaction.
ICICI Prudential AMC notes that on purchase of mutual fund, stamp duty will be levied on purchase amount less any other charges that includes a transaction charge. While in case of dividend reinvestment, duty will be charged on the dividend amount after deducting TDS.
Experts are of the view that investors with overnight or liquid funds or MFs with short term maturity of less than 30 days will be most impacted.