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Relevant questions and answers about stamp duty on mutual funds answered

What are the transaction types for which stamp duty is applicable?

Stamp duty on units of mutual fund scheme will be applicable for Purchases, SIP instalments (including existing SIPs registered prior to applicable date), Switch-ins, STP switch-ins (including existing STPs registered prior to applicable date), Dividend reinvestment transactions, Dividend Transfer / Sweep transactions (in the target scheme) and other Special Products in similar lines. The rate applicable for the same as mentioned above would be 0.005%.

Stamp duty would also be applicable on transfer of units the including transfer of units from one Demat account to another Demat account, Off market transfers etc. The rate applicable for such transfers shall be 0.015% which will be charged by Depositories.

Which mutual fund schemes shall be covered under stamp duty?

All mutual fund schemes (including ETF schemes) are covered under stamp duty charges.

What are the applicable stamp duty rates?

Here are the applicable stamp duty rates-

For purchase/allotment of units 0.005%
Transfer of units (levied by the depository) 0.015%

Will stamp duty be applicable for units held in Physical mode?

Yes, stamp duty is applicable for physical mode also.

What happens to the past SIP instalments? Will there be a retrospective stamp duty charged?

No, stamp duty is applicable only for the new transactions triggered from 1st July, 2020.

How is the mutual funds’ stamp duty calculated?

Let us assume that you are investing Rs 1,00,000.

Investment amount: Rs 1,00,000

Transaction amount: Rs 100 (as per applicability)

Net transaction amount: Rs 99,900

Stamp Duty= (Net transaction amount) *0.005/100.005= Rs 4.994

If the NAV is Rs 100 (assumed)-

The units purchased= (Net transaction amount-Stamp Duty)/ NAV= (99,900-4.994)/100= 998.9 units

Will the stamp duty be applicable for other transaction types like redemption/switch outs?

No, stamp duty won’t be applicable for redemption, switch outs, STP switch outs, Dividend pay-outs. This is because stamp duty is attracted by Units creation only.

Will the stamp duty be applicable on transfer of units from Broker account to Investor account?

No, because at the time of issuance of units, the stamp duty has already been deducted.

Will the stamp duty be applicable if one is converting the units from physical to Demat mode?

No, as the stamp duty is deducted already when the units are issued.

What are the scenarios where stamp duty on mutual funds is NOT applicable?

1.For redemption, STP switch-outs, dividend pay-outs or switch-outs

2.Broker to investor account- transfer of units

3.Physical units to Demat units- conversion

Will the stamp duty be applicable if we switch units from a growth to dividend plan or vice versa?

Yes. It shall be applicable for switching the units in the same scheme. This is applicable on both direct & regular plan.

How will the stamp duty be calculated on dividend reinvestment?

The stamp duty will be deducted on the amount of dividend (without TDS, if any) and the balance amount will be used to create the units.

Will the stamp duty be applicable on units allotted in unclaimed scheme?

Yes, on account of new unit creation, stamp duty will be applicable for Unclaimed scheme.

Will the stamp duty be displayed in your statement of account?

Yes, against every applicable transaction, the stamp duty amount shall be displayed in the SOA.

How does it impact you, as an investor?

Stamp duty is a one-time charge levied on the purchase of units of mutual fund schemes. Hence, longer the period of investment, relatively less significant can be the impact of it. However, the schemes of lower investment horizon may see a relatively higher impact. Let us look at it with an example of how stamp duty on liquid funds affects your returns-

Net investment amount Rs 99,900 Rs 99,900
Stamp Duty Rs 4.994 Rs 4.994
Investment amount Rs 99,895.006 Rs 99,895.006
Assumed return 4% 4%
Period of investment 10 days 30 days
[email protected] 4% Rs 109.473 Rs 328.421
New investment amount Rs 100,004.478 Rs 100,223.426
Capital Gain 104.478 323.426
Actual return% 3.82% 3.94%

As the investment period increased from 10 to 30 days, the effect on the actual return% relatively reduced.

Helpful information for investors: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under 'Intermediaries/ Market Infrastructure Institutions'. For redressal of your complaints, you may please visit . For more info on KYC, change in various details & redressal of complaints, visit This is an investor education and awareness initiative by Nippon India Mutual Fund.

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, affiliates or representatives (“entities & their affiliates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.