Stamp Duty- Ministry of Finance has issued details about the amendment made in the Indian Stamp Act, 1899, and new rules made from 1st July 2020. These changes have been done to bring out uniformity of the stamp duty on securities across the country. These changes of stamp duty on Mutual funds have effective from Wednesday, 1st July 2020.
Stamp duty on Mutual funds
Stamp duty on Mutual funds- Beginning from 1st July 2020 Investor will be charged a stamp duty of 0.0005% on the purchase of all types of mutual funds. Purchase includes lump-sum, SIP, Switch-in, and Dividend Reinvestment transactions, however, there will be no stamp duty on the redemption of any Mutual Fund. Here redemption includes simple redemption, conversion from physical mode to Demat mode, transfer from dividend to growth, or vice versa for the purpose of physical mode to Demat. The best example for calculation of duty on Mutual funds transaction can be read at the end of the post.
Also Read- The mutual fund cut-off timing in India as fixed by SEBI
Stamp Duty Rates being implemented w.e.f 1st July 2020
The SEBI has clarified the stamp duty rate on securities being implemented through the amendment Indian Stamp Act, the complete list of rates is being produced here:-
Stamp Duty Rates w.e.f. 1st July 2020
| Instrument | Rate |
|---|---|
| Issue of Debenture | 0.005% |
| Transfer and Re-issue of debenture | 0.0001% |
| Issue of security other than a debenture | 0.005% |
| Transfer of security other than debenture on delivery basis; | 0.015% |
| Transfer of security other than debenture on a non-delivery basis | 0.003% |
| Instrument | Rate |
|---|---|
| Derivatives— | |
| (i) Futures (Equity and Commodity) | 0.002% |
| (ii) Options (Equity and Commodity) | 0.003% |
| (iii) Currency and Interest Rate Derivatives | 0.0001% |
| (iv) Other Derivatives | 0.002% |
| Government Securities | 0% |
| Repo on Corporate Bonds | 0.00001% |
How will stamp duty will be charged on Mutual funds transaction.
Stamp duty calculation- Stamp duty will be charged on the value of mutual funds, after deduction of all other charges like transaction charges. It can be better understood with the following example.
Amount Invested- Rs. 1,00,100/-
Transaction Charges- Rs. 100
Stamp Duty- Rs. 5 {i.e. (Rs. 100100 – Rs. 100)*0.005/100.005}
NAV of Fund = Rs. 10
Units Allotted = 9999.50 {i.e. (Rs. 100100 – Rs. 100 – Rs. 5)/10}
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Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author does not own any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.
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Compiled by- CA Chirag Agarwal (Practicing Chartered Accountants)