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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Taxation

For a resident individual investor, which of the following is TRUE about the Securities Transaction Tax (STT) on mutual fund units?

STT applies when equity-oriented mutual fund units are redeemed, not when they are bought, and it is not charged on redemption of debt fund units. So the statement that STT applies to equity-oriented redemption but not debt fund redemption is correct.

  1. ASTT is levied on the purchase of equity-oriented units from the AMC
  2. BSTT is levied on redemption of equity-oriented fund units, but not on redemption of debt fund unitsCorrect
  3. CSTT is levied on redemption of debt fund units but not on equity-oriented units
  4. DSTT is levied on switching between plans of the same scheme only

Explanation

STT is charged when equity-oriented mutual fund units are redeemed (sold) and not at purchase. Debt fund redemptions do not attract STT, so the option stating STT on redemption of equity-oriented units only is correct.

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