After hours of confusion regarding the quantum of STT (securities transaction tax) hike on the sale of options, the Finance Ministry finally clarified that it will be hiked to Rs 6,250 on a turnover of Rs 1 crore.
This indicates a 25 percent increase. Earlier, the levy was Rs 5,000.
In the Finance Bill 2023, which was passed by Lok Sabha on March 24 morning, STT on the sale of options was hiked to Rs 2,100 on a turnover of Rs 1 crore against an earlier levy of Rs 1,700.
This created confusion as the Government had already hiked STT from Rs 1,700 to Rs 5,000 in 2016.
Meanwhile, on the sale of futures, the tax has been hiked to Rs 1,250 on a turnover of Rs 1 crore against an earlier levy of Rs 1,000. This indicates a 25 percent hike.
Commenting on the hike, Nikhil Kamath, co-founder of Zerodha, tweeted "STT is outside of exchange charges, stamp duty, GST, brokerage, and SEBI charges. By chance, if someone is profitable after all this, they pay the maximum income tax rate. We then wonder why many traders find it hard to be profitable."
STT hiked by 25 percent. If an intraday retail trader buys and sells 10 lots of nifty futures, he has to pay Rs 855 in STT or 1.7 points on each Nifty lot; if he trades 10 times a day, he has to capture 17 points of a nifty move every day on Stt alone. pic.twitter.com/Pm8Ru601MS
— Nikhil Kamath (@nikhilkamathcio) March 24, 2023
"For scalpers, arbitrageurs and HFT (High-Frequency Trading) firms transaction expense goes up by 25 percent which directly impacts their margins and bottom lines," Shrey Jain, founder and CEO, SAS Online said.
Introduced in 2004, STT is levied on transactions involving various types of securities. All stock market transactions that involve equity or equity derivatives such as futures and options are liable under STT, as are mutual fund transactions.
The government expects to collect Rs 27,625 crore from the securities transaction tax in FY24, which is 10.5 percent higher than the revised budget estimate of the preceding financial year.