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

Under the Indian income tax law currently taught in NISM-Series-V-A, how is the Securities Transaction Tax (STT) on the redemption of units of an equity-oriented mutual fund scheme treated?

STT is levied on the investor when units of an equity-oriented mutual fund scheme are redeemed or sold. It is not charged on direct purchase of units from the fund, and it is not a cost borne by the AMC.

  1. AIt is levied on the investor at the time of redemption of unitsCorrect
  2. BIt is levied only on purchase of units from the fund
  3. CIt is levied on the AMC as part of its management fee
  4. DIt is not levied on any mutual fund transaction

Explanation

STT is charged when units of an equity-oriented scheme are redeemed or sold, and it is borne by the investor. It is not charged on purchase of units directly from the fund. It is therefore not an AMC expense or something absent from mutual fund transactions.

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