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Brokerages hope that FM does not increase STT and LTCG in budget

STT is a major contributor to direct tax collections of the government, and increase in STT rates would likely provide a further boost to such revenues

July 23, 2024 / 03:01 IST
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Finance Minister Nirmala Sitharaman

As the Union budget approaches, brokerage firms are growing concerned that any increase in the Securities Transaction Tax (STT) or long-term capital gains (LTCG) tax could negatively impact trading volumes, affecting their business operations.

Market insiders told Moneycontrol that if STT is increased it will lower the volumes because traders would not trade as frequently as they do now as the overall trading costs would go up. Incidentally, the trading costs are already expected to rise following the uniform exchange fee regime that will come into effect from October 1.

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STT is a tax charged on the purchase and sale of securities that are listed on the stock exchanges in India.

“If STT is increased it will mostly be for the F&O segment and not the cash segment,” said a person wishing not to be named. He further added that an increase in STT would reduce market liquidity, as intraday traders significantly contribute to market liquidity.