Reetu | Jul 24, 2024 |
Budget 2024: Securities Transaction Tax Rates revised; Check New Rates
As the Finance Minister presented the Budget 2024 in Parliament on 23rd July, she proposed many changes to taxation and other sectors.
Levy of Securities Transaction Tax (hereafter referred to as STT) on transactions in specified securities was introduced vide Finance (No.2) Act, 2004.
According to the provisions of the STT, recognized stock exchanges, mutual funds (with equity-oriented schemes), insurance companies, or lead merchant bankers appointed by the company in respect of an initial public offering or an initial offer are required to collect the tax on specified securities and pay it to the credit of the Central Government within seven days of the end of the month in which the STT is collected.
STT tariffs have been updated on a regular basis since their debut in 2004.
The current STT rate on the sale of an option in securities is 0.0625% of the option premium, while the rate on the sale of a future in securities is 0.0125% of the price at which such “futures” are traded.
The rate of STT levy on delivery trades in equity shares is 0.1% on both purchase and sale transactions, whereas the rate of levy on the sale of an option in securities where the option is exercised is 0.125% of the intrinsic price (i.e. the difference between the settlement price and the strike price), which is payable by the purchaser.
In recent years, derivative (future and option) markets have grown at an exponential rate, and trading in such derivatives now accounts for a major share of stock exchange trade.
In view of this exponential growth of the derivative markets, it is proposed to increase the said rates of securities transaction tax on the sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium, and on the sale of futures in securities from 0.0125% to 0.02% of the price at which such “futures” are traded.
This amendment is proposed to be made effective from the 1st day of October 2024.
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