Investments in mutual funds will attract stamp duty-know how it will affect
This stamp duty will be charged at the rate of 0.005 percent on purchase or switch-in amount. Apart from this, stamp duty will also be collected on transfer of units of mutual funds.
Stamp duty will be levied on July 1 on purchase of mutual funds. This means that now stamp duty will have to be paid for investing in mutual funds. Duty will have to be paid on investment Systematic Investment Plan (SIP), Systematic Transfer Plan (STP) or any lump sum. However, it will not be charged if the units are redeemed.
This duty will be applicable to both equity and debt mutual funds. Stamp duty on mutual funds was due from January 2020. However, it was first postponed to April. Then it was July. Its most impact will be seen on debt especially short-term debt funds. They usually invest investors for short periods.
This stamp duty will be charged at the rate of 0.005 percent on purchase or switch-in amount. Apart from this, stamp duty will also be collected on transfer of units of mutual funds. The effect of this is the essence of falling on the funds of 90 days or less.
Let us understand this with an example. Let’s say that your purchase amount is 1 lakh rupees. If you add a transaction charge of Rs 100, then the total value of the purchase becomes Rs 1,00,100. Stamp duty will be charged at the purchase price of Rs 1 lakh. It will not be levied at Rs 1,00,100. At the rate of 0.005 per cent, it sits at Rs 5.
Instead of redemption of duty, it would be like an entry load on purchase. “The shorter the holding period, the greater the impact on returns,” says Kostubh Belapurkar, director (fund research), Morningstar India.
This duty will be taken once. In view of this, the investors who invest money in a period of 30 days or less will have the greatest impact. Investors usually park their money in liquid funds or short-term debt schemes for short periods.
Of course, the corporate investor should stop keeping his money in liquid schemes for a day or two. However, they will still be forced to keep money in this product for 15-30 days.
Amol Joshi, founder of Plan Rupee, says, “Large corporates will continue to invest in liquid and short-term funds.” The reason for this is that they do not get anything on the current account of the bank. Short-term FD rates are even lower. ”
