The centre has proposed hiking the securities transaction tax on Futures and Options (F&O) contracts, a move that will elevate the trading costs in the derivatives segment as well as help in curbing excessive trades.
In the Finance Bill 2023, passed by the Lok Sabha on Friday, the Securities Transaction Tax (STT) on Future options is proposed to be increased to 0.0625% from 0.05% and on futures contracts to 0.0125 from 0.01 %. Analysts opined that higher STT will shore up the government's revenues to some extent and also discourage excessive trading since a large number of retail traders are losing money in the segment.
After the Lok Sabha cleared the Finance Bill, the finance ministry issued a statement saying that there was a typographical error in the amendments with respect to the change in STT on option trading. The error, the finance ministry said, will be rectified in accordance with the extent procedure of the Government of India. As per the amendments, the STT on options has been increased from 0.017 % to 0.021%.
The changes proposed in the with respect to securities transaction tax and taxation of debt mutual funds are likely to have an adverse impact on the market. according to experts. Currently, officials said, an arbitrage is being created where an interest income from debt mutual fund -- where not more than 35 % is invested in the shares of a domestic company -- is not distributed. Rather, the same is converted into long term capital gains of 20 % with indexation. Lallit Tripathi, CMD of Vedant Asset, said effectively this means indexation benefit from debt mutual funds has been removed.
LS passes Finance Bill, set to tax investors heavily from April
