Stamp Duty On Mutual Funds To Apply From 1 July 2020- Important Things to Know
Capital markets regulator SEBI on July 1 said stamp duty is
not applicable on redemption of mutual fund units but switching in mutual fund
would attract the stamp duty.
SEBI released the FAQs on stamp duty collection on July 1,
with the provisions of the amended Indian Stamp Act coming into effect.
The regulator said that the units of mutual fund schemes are
to be considered as securities for the purpose of applicability of stamp duty. Regarding applicability of stamp duty on redemption of
mutual fund (MF) units, SEBI said “redemption is not liable to duty as it is
neither a transfer nor an issue nor a sale”. However, switching in mutual fund would attract stamp duty.
“The issue of fresh units in the switched scheme would attract stamp duty even
though there is no physical consideration paid or transfer of ownership,” SEBI
said. This is because the new units are deemed to have been
purchased with the NAV (net asset value) realised from the sale of earlier
units, it added.
On calculation of stamp duty on issuance of mutual fund
units, SEBI said stamp duty is imposed on the value of units excluding other
charges like service charge, AMC fee, GST etc.
If the units are issued for ₹1 crore then ₹500 stamp duty is
to be remitted to States.
The government in January had notified RTAs to act as
depository for limited purposes of acting as a collecting agent under the
Indian Stamp Act, 1899. Therefore, Registrars to an issue and share Transfer Agents
(RTAs) would collect stamp duty for non-demat mutual fund and alternative
investment funds (AIF) transactions.
“The transfer of collected stamp duty to respective
States/UTs by RTAs also is governed by buyer-based principle ... And not on the
basis of registered office of the issuer,” markets watchdog noted.
In case of mutual fund and AIF transactions through
recognized stock exchange, the respective stock exchange/authorized clearing
corporation or a depository is already empowered to collect stamp duty.
On transfer of units of Mutual Funds and AIFs held in
physical form stamp duty is to be collected from the transferor but these
transfers happen outside the purview of RTAs.
In such cases, SEBI clarified stamp duty has to be collected
and remitted only by collecting agents, which is RTA for physical units and
depositories for demat units. Where mutual Fund and AIF units are issued in
physical form, stamp duty has to be collected and remitted by RTA.
Accordingly, when the transferee approaches RTA for
effecting the transfer in their books, RTA will be collecting the stamp duty
from the transferor before effecting the transfer which will then be remitted
to the State of domicile of the transferee. The collecting agents have to
transfer collected stamp duty to the State government within three weeks of the
end of each month.
If any collecting agent fails to collect the stamp duty or
fails to transfer stamp duty to the State government within fifteen days of the
expiry of the time specified, shall be punishable with fine of not less than ₹1
lakh which may extend up to one per cent of the collection or transfer so
defaulted.
The Finance Ministry on June 30 said States will collect
stamp duty at uniform rate on transactions of shares, debentures and other
securities from July 1.
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