The increase in Security Transactions Tax could be negative for derivatives volumes, according to analysts.
The government increased the STT on sale of security option from 0.0625% to 0.1%, while tax levied on futures was also jacked up from 0.0125% to 0.02%, in Budget 2024.
Presented by the Finance Minister on Tuesday, Budget 2024 introduced several changes in taxes, including in income and capital gains. Changes in the Security Transactions Tax will be effective from Oct. 1.
The hike could be a negative for earnings of brokers. However, no change in income tax treatment comes as relief, according to Jefferies. Nuvama also said the move could impact earnings of brokers and exchanges.
UBS expects softness in the derivatives markets in the near-term. The increase could be marginally negative for derivative volumes, Nuvama said.
However, SBI Funds Management does not expect material change in derivatives volumes.
The Security Transactions Tax hike is along expected lines, according to Axis Securities Ltd. The move has been made to curb excessive speculation in the derivatives segment, the brokerage said.
STT or Securities Transactions Tax is a direct tax levied on every purchase and sale of securities that are listed on the stock exchanges in India. This tax is paid on the transaction value and hence increases the transaction costs. The stock exchange collects the tax from the buyer or seller and pays it to the government.
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