STT reduced for equity futures, MFs & ETFs
While welcoming the finance minister’s move of reducing STT for some categories, market experts said that the government could have done a better job by reducing the tax on delivery transactions, which could have also led to a decrease in speculative trading.
While presenting the Budget 2013-14, finance minister P Chidambaram reduced STT on equity futures from 0.017% to 0.01%. The FM, however, did not make any changes to the STT rates for cash market transactions. Moreover, for mutual funds (MFs) and exchange-traded funds (ETFs), the STT component has been cut from 0.25% to 0.001%.
Finally, for the sale or purchase of MF units or ETFs on the stock exchange platform, the levy has been reduced from 0.1% to 0.001% and will be borne only by the seller.
“The reduction of STT across financial instruments will provide a boost to the capital markets,” said Naresh Makhijani, partner (tax) – banking and financial sector, KPMG. In a similar context, Aashish Somaiyaa, CEO, Motilal Oswal AMC, said: “STT reduction on ETF is a further boost to aiding returns with lower transaction costs.”
STT was introduced by the government in 2004 on sale and purchase of equities and, according to rough estimates, accounts for a substantial part of the overall transaction costs in the stock market.
Ever since the tax was imposed on stock market transactions, traders and industry associations have
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