Stamp duty on mutual fund units
0.005% of every purchase, ₹5 per lakh, taken before units are allotted. What it applies to and how the RTA handles it.
Since 1 July 2020, every purchase of mutual fund units pays stamp duty of 0.005% of the amount invested. That is ₹5 on every ₹1 lakh. It comes from the Finance Act, 2019 amendments to the Indian Stamp Act, 1899, which set one national rate on the issue of securities other than debentures. Mutual fund units fall in that category.
The duty is taken out of your investment before units are allotted, so you get units for the amount after stamp duty. The RTA computes it, shows it as a separate line on your account statement, collects it and deposits it with the Government through the fund.
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What attracts stamp duty and what does not
Fresh or additional purchase (lump sum)
Stamp duty?
Yes, 0.005%
Why
New units are issued
SIP instalment
Stamp duty?
Yes, 0.005% on each instalment
Why
Each instalment is a purchase
STP: the transfer-in leg
Stamp duty?
Yes, 0.005%
Why
The target scheme issues new units
Switch: the switch-in leg
Stamp duty?
Yes, 0.005%
Why
The switch-in is a purchase
IDCW reinvestment
Stamp duty?
Yes, 0.005%
Why
Reinvested IDCW buys new units
Redemption, SWP, switch-out, STP-out
Stamp duty?
No
Why
Units are extinguished, not issued
NFO allotment
Stamp duty?
Yes, 0.005%
Why
Units are issued at allotment
| Transaction | Stamp duty? | Why |
|---|---|---|
| Fresh or additional purchase (lump sum) | Yes, 0.005% | New units are issued |
| SIP instalment | Yes, 0.005% on each instalment | Each instalment is a purchase |
| STP: the transfer-in leg | Yes, 0.005% | The target scheme issues new units |
| Switch: the switch-in leg | Yes, 0.005% | The switch-in is a purchase |
| IDCW reinvestment | Yes, 0.005% | Reinvested IDCW buys new units |
| Redemption, SWP, switch-out, STP-out | No | Units are extinguished, not issued |
| NFO allotment | Yes, 0.005% | Units are issued at allotment |
Worked example: a lump sum
- 1
Formula
Stamp duty = purchase amount × 0.005%. Amount invested = purchase amount minus stamp duty. Units = amount invested ÷ applicable NAV.
- 2
Plug in
Purchase amount ₹1,00,000. Stamp duty = 1,00,000 × 0.00005 = ₹5.
- 3
Amount invested
₹1,00,000 minus ₹5 = ₹99,995.
- 4
Units at an NAV of ₹50
99,995 ÷ 50 = 1,999.9 units. Without stamp duty it would have been 2,000 units, so the duty costs 0.1 unit.
Worked example: a monthly SIP
- 1
Per instalment
SIP of ₹5,000. Stamp duty = 5,000 × 0.00005 = ₹0.25. Amount invested = ₹4,999.75.
- 2
Units at an NAV of ₹25
4,999.75 ÷ 25 = 199.99 units for that instalment.
- 3
Over a year
12 instalments × ₹0.25 = ₹3.00 of stamp duty on ₹60,000 invested.
Worked example: a switch
- 1
Switch-out
Investor switches ₹2,00,000 from a debt scheme to an equity scheme of the same fund. The switch-out is a redemption: no stamp duty.
- 2
Switch-in
The switch-in is a purchase: 2,00,000 × 0.00005 = ₹10 stamp duty. ₹1,99,990 is invested in the equity scheme.
Free account, this exam preselected.
Rounding
Fund houses compute the duty to the paisa and may differ slightly in how they round. On most amounts the difference is a fraction of a paisa. Your account statement shows the exact amount deducted.
Stamp duty is not STT
Two small levies that candidates and investors mix up.
Charged on
Stamp duty
Purchase (issue of units)
Securities Transaction Tax (STT)
Sale or redemption of equity-oriented units
Rate on mutual fund units
Stamp duty
0.005% of the purchase amount
Securities Transaction Tax (STT)
0.001% when equity-oriented units are sold back to the fund
Debt and liquid schemes
Stamp duty
Charged on purchases
Securities Transaction Tax (STT)
Not charged
Who pays
Stamp duty
Investor, from the investment amount
Securities Transaction Tax (STT)
Investor, as the seller
| Stamp duty | Securities Transaction Tax (STT) | |
|---|---|---|
| Charged on | Purchase (issue of units) | Sale or redemption of equity-oriented units |
| Rate on mutual fund units | 0.005% of the purchase amount | 0.001% when equity-oriented units are sold back to the fund |
| Debt and liquid schemes | Charged on purchases | Not charged |
| Who pays | Investor, from the investment amount | Investor, as the seller |
Other stamp duty an RTA sees
- check_circleTransfer of units between demat accounts is a different head of the same schedule: 0.015% on a delivery basis, not the 0.005% issue rate.
- check_circleTransmission of units: the indemnity bond and affidavit a claimant signs carry stamp duty as the applicable law prescribes, which SEBI's master circular leaves to that law.
- check_circleUnits bought on a stock exchange platform pay the duty on purchase just the same; the exchange route changes how money moves, not whether units are issued.
Why it matters most for short holdings
On a long-term equity investment, ₹5 per lakh is noise. On money parked for a few days in a liquid or overnight fund, it is a real share of the return, because the duty is charged on the full amount each time you buy, whatever the holding period.
Stamp duty questions
What is the stamp duty on mutual fund purchase?expand_more
0.005% of the purchase amount, or ₹5 per ₹1 lakh, since 1 July 2020. It applies to lump sums, SIP instalments, STP-in, switch-in and IDCW reinvestment.
Is stamp duty charged on mutual fund redemption?expand_more
No. Stamp duty is charged only when units are issued. Redemptions, SWPs and switch-outs pay none, though equity-oriented redemptions pay STT.
Does stamp duty apply to debt and liquid funds?expand_more
Yes. It applies to purchases in all schemes, whether equity, debt or liquid. ETF units bought from another investor on the stock exchange are a transfer, which pays the 0.015% delivery rate instead.
Who collects mutual fund stamp duty?expand_more
The RTA computes and collects it at allotment, shows it separately on the account statement and deposits it with the Government through the fund.
Why did I get slightly fewer units than amount divided by NAV?expand_more
Because units are allotted on the amount left after stamp duty (and any transaction charge). On ₹1 lakh at an NAV of ₹50 you get 1,999.9 units, not 2,000.
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