Can you explain how the stamp duty impact on mutual funds would work from July 01 onwards?

As stipulated in the government order, all mutual fund purchases will attract stamp duty from 01 July. It will be levied on debt and equity funds but impact will be sharper on debt funds due to shorter holding periods. This stamp duty will apply to all MF transactions including lump-sum, SIPs, STPs and dividend reinvestment plans, but not to redemptions.

The rates have also been specified for the stamp duty. On purchase of mutual fund units, stamp duty at a rate of 0.005% if value will be levied, while the stamp duty on off-market transfer of MF units between two demat accounts will be 0.015%. Purchase of units will include purchase, switch-in and dividend reinvestment.

Experts opine that transactions in units of liquid or overnight funds and other short duration funds of less than 30 days will really feel the pinch. One of the key intent of this move is to maintain an audit trail and also to encourage a long term approach to mutual funds and prevent investors from frequently trading in and out of these mutual funds.