The Hindu : Business : Impact of tax on securities transaction

Online edition of India's National Newspaper
Friday, Jul 09, 2004

Business

Business

Impact of tax on securities transaction

By K. T. Jagannathan

CHENNAI, JULY 8. The Union Finance Minister, P. Chidambaram, may have abolished the long-term capital gains tax for securities but has imposed a transaction tax of 0.15 per cent on the buyer. The proposal, predictably, has drawn flak.

When the regulator imposed a turnover tax earlier, it met with resistance and stockbrokers even went on a strike. Cases were filed in varied courts. And finally, the Supreme Court stepped in to uphold the decision to collect turnover charges by the Securities and Exchange Board of India (SEBI).

At present, stock exchanges are collecting turnover charges. In addition to the turnover charges, investors pay service tax, stamp duty, infrastructure charges and brokerage. Coming on top of all these, the latest tax on transaction is an additional burden on investors. This, it is felt, will affect operators who transact on small margins. It will affect brokerage houses also as they have to pass it on to investors. Already, the brokerage is at a low-ebb. Ipso facto, members of the exchange fear they will be marginalised.

This latest tax on transaction may discourage investors from coming to the market. With the return on fixed deposits at not-so-attractive levels, the budget-induced move is bound to have a negative fallout on the available avenues of opportunity for investors.

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