So from the 1st of July, the Indian Government has imposed stamp duty of 0.005% of all the mutual fund purchases. That means for any investment in a mutual fund scheme will have a stamp duty like equity, debt, or anything. But to note that it should be applied only when you are purchasing any new units, it's not applicable if you are selling or redeeming.
If you are investing using Lump-Sum or using Systematic plans into any mutual fund scheme or if you are doing a systematic transfer plan, this stamp duty is applicable everywhere. Though the Stamp Duty is too low, but it still a charge which is being taken from the investors. For example if you are investing 1,00,000 as a lump sum the stamp duty will be around Rs 5.
Now with this change common man is not much infected because usually, we invest for the long term and thus in the long term the effect of this is quite minimum. Say for example if you investing for 5 years, then Rs 5 is very less as compared to the amount you will be getting after maturity. The constitutions like Financial Companies and Banks have more effect on this change because they usually invest a lump sum for a short period of time and thus their earning will reduce by 0.005%, though it still is not much.
According to Investopedia
Stamp duty is the tax governments place on legal documents, usually in the transfer of assets or property. Governments impose stamp duties, also known as stamp taxes, on documents that are needed to legally record certain types of transactions. This includes legal documents recording marriages, military commissions, and the sale or transfer of a property.
In simple terms, the stamp duty is the government's measures to record the transactions happening on the mutual fund side. As you might aware that from the last 3-4 years mutual fund transactions have been increased like anything as more and more investors are using this approach to park their money. Now the government has sensed that with the increasing transaction they can impose yet another tax on the common people to get money from them. This tax is nothing but a source of income for the government at the expense of the common man.
Previously the stamp duty was only applicable for buying a house i.e. at the time of registering a house you will pay a stamp duty which is actually a government's tax on the property transactions. Though the stamp duty n property transactions used to be quite high as compared to the stamp duty on mutual funds.
But in my opinion stamp duty on registration is fine because their the sale deed is happening and thus we need to involve the government for signature and all. But adding a stamp duty on mutual fund investments is quite bad and thus this is nothing less than getting money from their own citizens in the name of tax. Directly or indirectly we have to pay too much tax and thus this is not gonna stop at any level.