Government will levy stamp duty tax of 0.01 in delivery transactions and 0.002% in intraday and derivatives and options transactions.
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, transactions in mutual funds are mostly delivery transactions as fund managers follow a buy and hold strategy. This means mutual fund investors have to pay a stamp duty tax of Rs.1000 on transaction of every Rs.1 crore.
However, there is confusion among industry players on its implementation day. A CEO of a private fund house said that though government has declared rates at which stamp duty tax would be levied on financial transactions, there is no clarity on operational front and date of implementation of this tax.
Earlier, in interim budget 2019, the Union Finance Ministry had announced that the government would levy stamp duty on financial securities transactions, which includes financial instruments like direct stocks and mutual funds.
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.
