How does it impact the investor?
The impact on long-term investments by retail investor is nominal. Since the stamp duty will be charged as one-time charge, if an investor invests Rs 1 lakh in a mutual fund scheme or in a stock and holds it for two years, he will have to pay a duty of only Rs 5. In fact, it will be marginally lower as the stamp duty is applicable on the net investment value i.e gross investment amount less than any other deduction like transaction charge. There is no duty at the time of redemption.
However, the impact is higher for investors with short-term investment horizon such as banks and corporates who invest in liquid and overnight schemes of mutual funds. While the one time charge is only 0.005 per cent, if an investor has only one-month investment horizon, the annualised cost would rise to 0.06 per cent. In case the investment horizon is one week, the annualised impact cost would be 0.26 per cent and on a one day investment horizon, the cost works out to 1.82%. - So the charge is 0.005 or 1.82%, I can’t understand this phrase!?