Investment in direct stocks, mutual funds, ULIPs and NPS may become a bit expensive for investors.
Government may levy stamp duty tax of 0.015% in delivery transactions and 0.003% in intraday and option transactions, say officials at leading tax consulting firms.
The tentative stamp duty tax on debt instruments would be 0.0001 and 0.002% on futures. There may be no stamp duty tax on transaction of government securities.
Earlier, in interim budget 2019, the Union Finance Ministry has announced that the government would levy stamp duty on financial securities transactions, which includes financial instruments like direct stocks and mutual funds.
Since mutual funds deal with shares, every time a fund manager executes transaction, the fund has to pay stamp duty along with securities transaction tax. Also, most transactions in mutual funds are delivery transactions as fund managers follow buy and hold strategy.
A CEO of a foreign fund house requesting anonymity said that the impact of stamp duty tax will be huge on the industry. “Currently, the mutual funds fund industry executes transaction of Rs.5 lakh crore each month in equity and debt markets. Hence, the impact of stamp duty would be large. Also, the impact would be more on funds with high turnover ratio,” he 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.
