Investment in direct stocks, mutual funds, ULIPs and NPS is likely to become a bit expensive for investors.
Hidden in the fine print of the interim Budget document, Piyush Goyal, Union Finance Minister In Charge has said that the government would levy stamp duty on financial securities transactions, which includes financial instruments like direct stocks and mutual funds.
Goyal said, “Our Government had promised last year that we will carry out reforms in stamp duty levied and collected on financial securities transactions. I am proposing, through the Finance Bill, necessary amendments in this regard. The amendments proposed would usher in a very streamlined system. Stamp duties would be levied on one instrument relating to one transaction and get collected at one place through the stock exchanges. The duty so collected will be shared with the state governments seamlessly on the basis of domicile of buying client.”
Industry experts believe that initial reading of budget document implies that government would re-introduce stamp duty tax in demat transactions. However, the impact would be marginal due to low rate of the stamp duty tax.
Though government is yet to announce the rate at which stamp duty will be levied on demat transactions, it was 0.01% in delivery transactions and 0.002% in intraday, future and option transactions.
Since mutual funds, ULIPs and NPS deal with shares, investors investing in these financial instruments will have to bear this tax. Also, investors having exposure to mutual funds with high turnover ratio will be affected more due to re-introduction of stamp duty.
AMC Compliance Head said, “Earlier, the government had waived off stamp duty in transaction of securities in demat form. However, the government has proposed to re-introduce this duty. Also, stock exchanges will have to track origin of investors to distribute stamp duty among states.”