Stamp duty to have “little to no impact” on retail investors: Experts

All mutual fund purchases will attract from Wednesday but experts believe it will have “little to no impact” on retail as charges are too low.

The of 0.005 per cent will be applicable on all purchase transactions including systematic investment plans (SIPs), lumpsums, dividends reinvested and switch-ins.

Apart from purchase transactions, transfer of units from one demat to another demat account including market or off-market transfers will attract of 0.015 per cent.

However, no such duty is applicable on redemption or sale of units.

Amit Jain, co-founder and CEO at Ashika Wealth Advisors said levy of stamp duty will hardly impact mutual fund as it is too low to have any significance.

“It will have little to no impact on retail It does not really impact retail investors unless they invest several crores of rupees for less than 3 months. However, corporate investors investing several crores and also investing for few days to a month in categories such as overnight funds may see some impact,”said Vidya Bala, co-founder of Primeinvestor.

“What investors need to be aware of though is like the period of exit load, a small sum will be deducted from their investments, before units are allotted,” she added.

However, Jimmy Patel, CEO at Quantum Mutual Fund said the stamp duty charge will have impact on investors investing in Now, they will be allotted units after deducting the stamp duty.

The impact will depend on the holding period and a long-term investor will have minimal impact, said Omkeshwar Singh, who is head RankMF at Samco Securities.

Prateek Mehta, co-founder of Scripbox, said the stamp duty will be applicable on both debt as well as equity funds. It is a one-time charge and its impact will be felt only by very short-term investors as the annualised impact over the short term is higher.

“For mid to long-term investors across mutual fund instruments, there will not be any material impact,” he added.

Since fresh purchases would attract stamp duty each time, he advised investors to not rejig their portfolio frequently so as to avoid the impact of stamp duty.

Explaining about allotment of mutual fund units, Bala said units will be allotted only after deducting stamp duty. For example, an investor will suffer Rs 5 for every Rs 1 lakh. So, for an investment of Rs 1 lakh, units will be allotted on Rs 99,995.

Stamp duty charge is due to an amendment in the Indian Stamp Act, 1899 by Finance Act 2019. It requires collection of stamp duty on all securities market instruments, including It was originally to be effective from January 9 , but the government later postponed it to be effective from July 1.

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