In a significant change for Futures and Options (F&O) traders, Finance Minister Nirmala Sitharaman announced the doubling of the Securities Transaction Tax (STT) rate from 0.01 percent to 0.02 percent. This means that equity and index traders will face double the tax on their trades once the budget proposal is implemented.
Announcing the proposal, Sitharaman said, “I have a couple of proposals for deepening the tax base. First, Securities Transaction Tax (STT) on futures and options of securities is proposed to be increased to 0.02 percent and 0.1 percent, respectively. Second, for reasons of equity, I propose to tax income received on buyback of shares in the hands of the recipient.”
Experts believe that the increase in STCG (short-term capital gains) and LTCG (long-term capital gains) tax and STT on F&O is a dampener for the stock markets and might spook the market, but an increase in the exemption limit from the current Rs. 1L to Rs. 1.25L will help retail investors and encourage long-term investing.
“The increase in the tax rate on long-term capital gains and short-term capital gains on equity, along with the increase in STT on futures and options, are aimed at moderating currently heightened activity levels and fostering a more sustainable pace of growth in the stock market. We anticipate a small period of adjustment as the market adapts to these new tax measures, but this will ultimately contribute to a sustainable investment landscape with balanced and orderly growth of the capital market,” said Shripal Shah, MD & CEO, Kotak Securities.
However, market traders and investors remained very disappointed at the increase in these taxes. Many took to twitter to showcase their frustration. Here are a few of them.
