Stamp Duty to make investments in MF, ULIP, NPS, PF, other instruments expensive from July 1

By: |
Updated: Jul 02, 2020 11:11 AM

Stamp Duty is well known in property transactions, but according to the Indian Stamp Act, 1899, the Duty is levied on every financial instrument at the time of issue at the primary market.

Stamp Duty, Securities Transaction Tax, STT, Stamp Duty on property transaction, mutual fund, MF, equity investment, debt instruments, Unit Linked Insurance Plans, ULIP, National Pension System, NPS, Provident Fund, PF, FMPsStamp Duty would be levied on both equity and debt instruments.

While the talk of removal of the Securities Transaction Tax (STT) on transaction of securities on secondary market platforms is on, implementation of the Stamp Duty is set to put burden on investors, as the Duty is to be levied and collected on financial securities transactions at the national level from July 1, 2020.

The Stamp Duty so far is a state subject and is collected by some states, mostly as a fixed amount, depending on the value of a securities transaction. While some states have abolished it on many transactions, different states used to levy it on different transactions at different rates.

According to Uttam Bagri, chairman of the Bombay Stock Exchange Brokers forum, after implementation of Stamp Duty at the national level, it will be levied proportionately as percentage of the value of securities transaction, which would increase the amount of duty than the fixed cap that is practiced in some states.

The decision of streamlining the Stamp Duty was announced by former finance minister Piyush Goyal during the 2019 Interim Budget.

“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,” Goyal had said during his Budget speech.

Stamp Duty is well known in property transactions, but according to the Indian Stamp Act, 1899, the Duty is levied on every financial instrument at the time of issue at the primary market.

So, unlike STT, which was levied predominantly on equity transactions conducted on stock market platforms, Stamp Duty would be levied on both equity and debt instruments at the time of issue for the first time or making transactions with the depository of the company.

As a result, with the implementation of Stamp Duty at the national level from July 1, 2020, investments in New Fund Offers (NFOs) or primary issues either through direct investments or investments through indirect routes like Mutual Funds (MFs) would become expensive. Accordingly, investments in other equity-oriented products like – Unit Linked Insurance Plans (ULIP), National Pension System (NPS) and even Provident Fund (PF), despite having lower equity exposure, would become expensive.

As Stamp Duty is also payable on investments in debt instruments through primary markets, investing in Fixed Maturity Plans (FMPs) may also become expensive.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Should you pre-pay your education loan? Find out
2Covid-19: What leads to bitcoin surge during pandemic period?
3EPS 1995: Jeevan Praman Patra last date extended; submit Life Certificate for pension till February