Jaitley proposes to further tax equity trade

New Delhi, Feb 29 (IANS) The central government on Monday proposed to hike the levy on options trading in equity markets to 0.05 percent.

Finance Minister Arun Jaitley proposed to hike the securities transaction tax (STT) on options trade from 0.017 percent to 0.05 percent in the Union Budget for 2016-17.

Jaitley presented the budget in parliament on Monday.

“Rate of securities transaction tax in case of ‘Options’ is proposed to be increased from 0.017 percent to 0.05 percent,” Jaitley informed.

The Finance Act, 2004 provides for the enactment of STT on sale of an option in securities, where option is not exercised. The STT is charged at the rate of 0.017 percent on the option premium.

The amendment is expected to take effect from June 1st, 2016.

However, the government maintained the rate of levy on cash transactions at 0.12 percent.

According to industry estimates, the government collects around Rs.7,000 crore through STT.

Further, the minister proposed a tax at the rate of 10 percent on gross amount of dividends which are in excess of Rs.10 lakh per annum.

“Dividend Distribution Tax (DDT) uniformly applies to all investors irrespective of their income slabs. This is perceived to distort the fairness and progressive nature of taxes,” the minister informed the Lok Sabha.

“Persons with relatively higher income can bear a higher tax cost. I, therefore, propose that in addition to DDT paid by the companies, tax at the rate of 10 percent of gross amount of dividend will be payable by the recipients, that is, individuals, HUFs (Hindu undivided family) and firms receiving dividend in excess of Rs.10 lakh per annum.”

The budget document the proposal, after the amendments to the Income-tax Act, will be effective from the April 1, 2017.

The two proposals dented the Indian equity markets during the day’s trade.

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