Revenue Of Brokerage Houses May Be Affected

Tax rates on capital market transactions: There could be an impact on market volume in the near-term

Subha Sri Narayanan, Director, CRISIL Ratings

FinTech BizNews Service

Mumbai, July 23, 2024: The Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman tabled the Economic Survey 2023-2024 in Parliament today.

Deepening tax base

• Security Transactions Tax on futures and options of securities increased to 0.02 per cent and 0.1 per cent respectively.
• Income received on buy back of shares in the hands of recipient to be taxed.

Simplification and Rationalisation of Capital Gains

• Short term gains on certain financial assets to attract a tax rate of 20 per cent.
• Long term gains on all financial and non-financial assets to attract a tax rate of 12.5 per cent.
• Exemption limit of capital gains on certain financial assets increased to Rs1.25 lakh per year.

Subha Sri Narayanan, Director, CRISIL Ratings, has shared an important quote on capital markets: The measures pertaining to tax rates on capital market transactions – Securities Transaction Tax on derivatives, Long Term Capital Gains tax, and Short-Term Capital Gains tax – are aimed at bringing in greater stability in the equity markets by incentivising long-term investment activity and curbing the derivatives segment, where traded volume has risen over 99%. There could be an impact on market volume in the near-term that, in turn, could affect the revenue of brokerage houses which have enjoyed rising profitability because of the market upcycle. At the same time, they have also had to realign their business models to manage the evolving regulatory environment, with the most recent change being the revision in the charges levied on stockbrokers by market infrastructure institutions.”