Budget 2024: In a significant blow to Futures and Options (F&O) traders, Finance Minister Nirmala Sitharaman declared raising the STT rate from 0.01 per cent to 0.02 per cent. This means that equity and index traders will face double the tax on their trades once the budget proposal is implemented.
Experts believe that the increase in STCG (short-term capital gains) and LTCG (long-term capital gains) tax and STT on F&O is a dampener for the stock markets and might spook the market, but an increase in the exemption limit from the current Rs. 1L to Rs. 1.25L will help retail investors and encourage long-term investing.
Commenting on the same, Sunil Damania, Chief Investment Officer, MojoPMS believes that the STT hike will curb excessive speculation in F&O market.
’The budget outlines a strategic plan to propel India towards its goal of becoming a developed nation, Vikshit Bharat, by 2047. The anticipated adjustments to the capital gains tax were implemented, addressing a significant need. The gap between short-term and long-term capital gains has widened from 5 per cent to 7.5 per cent, which will enhance government revenue from personal income tax,” said Damania.
Despite the increase in capital gains tax, there was no reduction or removal of the Securities Transaction Tax (STT), which is perceived as unfair to equity investors. However, the increase in STT on derivatives is a positive step towards curbing excessive speculation in futures and options (F&O) markets.
