Investing in stock markets became expensive from June 1 as traders will now pay slightly higher amount towards taxes from Wednesday. There are two changes in taxes that traders should take note. One, owing to Krishi Kalyan Cess an additional 0.5 per cent service tax will be levied on brokerage and transaction charges. This will take the existing service tax rate from 14.5 per cent to 15 per cent.
Secondly, for Option traders specifically, the Security Transaction Tax (STT) is increased to 0.05 per cent from the existing 0.017 per cent.
Will these new imposts have an impact on trading volumes? Experts are divided on the issue.
Mustafa Nadeem, CEO, Epic Research Pvt Ltd feels it will impact investor margins and would be negative for markets. “The increase in levies will only result in loss of profit margin to retail investors. Retail traders work for profit margins of even 50 paisa which very well can be a spread in a stock quote. These increases are negative for short-term players and come heavy especially when a customer is in loss.
Nithin Kamath, founder and CEO, Zerodha said, however, did not see much impact, especially of STT on options. “We do not see the increase in taxes as a deterrent,” Kamath said.