Stamp duty will be deducted from the net investment amount. Suppose you have taken a mutual fund of Rs 1 lakh, then stamp duty of Rs 5 will be levied. Funds of the remaining 95 rupees will be allotted only.
Franklin Templeton Mutual Fund
Before taking a mutual fund, it is important to see what are its additional expenses. Here the extra expense means the amount taken out from the money invested in the mutual fund. This amount is linked to mutual funds but it has no role in increasing returns or investments. Therefore, it should not appear later that more money has been spent before taking the fund. Additional expenses include stamp duty, expense ratio, exit load and securities transactions.
This is the most recent expense associated with mutual fund transactions. It has been added on 1st July 2020. Stamp duty is levied on issuing mutual funds or transferring funds. If units of mutual funds are taken in demat or physical mode, stamp duty has to be deposited on it. Stamp duty comes under direct tax which is levied by the government. The rate of tax has been kept the same in every province so that no state collects more or less tax from another state.
While issuing the security of the mutual fund, the investor will have to pay a separate amount of 0.005 percent. If you transfer security, then 0.015% charge will have to be paid. If you buy a new fund, then 0.005% of the amount invested will have to be paid as stamp duty. If you transfer funds from one demat account to another, you will have to pay a separate amount of 0.015%. Stamp duty will be deducted from the net investment amount. Suppose you have taken a mutual fund of Rs 1 lakh, then stamp duty of Rs 5 will be levied. Funds of the remaining 95 rupees will be allotted only.
The Asset Management Company or AMC deducts the annual expenses for managing and distributing the fund. To calculate the expense ratio of a mutual fund, the total assets of the fund house are divided by the total expenditure on the mutual fund scheme. The number it gets is the expense ratio in percentage. It should be noted here that the expense ratio is linked to the fund’s AMC. When the asset value of a fund falls, the expense ratio is high. But if the asset value of the fund is high, then the expense ratio will be low.
Exit load means that if an investor transfers from one fund to another, then a certain amount is charged. This amount is called exit load. This amount is taken by the fund house. It can also be called a penalty when a fund house takes it for leaving the fund prematurely. This money is taken if you leave the fund before the lock-in period. However, it is not necessary that all fund houses take exit load. Therefore, before taking funds, check whether there is a rule of exit load or not. This will save you from extra expenses.
Understand this with an example. Let’s say you are selling 500 units of a fund that you bought 4 months back. Since the funds are sold before the completion of 1 year, there will be an exit load of 1%. If the NAV of your unit is Rs 100, then at the rate of 1%, you will get a NAV of Rs 99. Here Re 1 was deducted as exit load. Now you will get Rs 49500 for 500 units at the rate of Rs 99.
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