Stamp duty for MF Transactions

Stamp duty for MF Transactions from July 1st 2020

In line with Finance Bill 2019 announcements, Government of India had notified the ‘Indian Stamp (Collection of Stamp-Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019’ regarding application of a uniform stamp duty. This was supposed to be effective from 9th January 2020, but was later extended and is now effective from 1st July 2020. This implementation of the uniform stamp duty will be applicable on transfer of shares, debentures, futures, options, currency and other capital market instruments. This includes Mutual Funds as well. This move is expected to facilitate ease of doing business, bring in equitable sharing of tax revenue across the states and promote pan India development of securities market.

The applicable rates for different capital market instrument along with the responsibility of collecting and paying the stamp duty liability are mentioned below:

Rates applicable

Sr. No. Descrption Applicable new rate 1 Issue of security other than debenture (including mutual fund units) 0.005% 2 Transfer of security other than debenture on delivery basis (including transfer of mutual fund units) 0.015% 3 Transfer of security other than debenture on non-delivery basis 0.003% 4 Derivatives - Futures (equity and commodity) 0.002% 5 Derivatives - Options (equity and commodity) 0.03% 6 OTC Currency and interest rate derivatives 0.0001% 7 Other derivatives 0.002% 8 Government securities 0% 9 Repo on corporate bonds 0.00001%

Transactions where stamp duty will get applied are Purchase, Dividend reinvestment, Switch (both for units issued in Demat and Non-Demat mode). Kindly note that Stamp duty will be deducted from the net investment amount i.e. gross investment amount less any other deduction like transaction charge. Units will be created only for the balance amount (Net investment amount – Stamp duty deducted). Stamp duty will be computed @0.005% on an inclusive method using the formula - ((Investment amount – Transaction charge, if any) / 100.005) * 0.005. Let’s see an illustration below. For example, purchase amount = Rs.10,000/- ; transaction charge – Rs.100/- Stamp duty = (Rs.10,000 – Rs.100)/100.005 * 0.005 = 0.49