Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Levy of Securities Transaction Tax (hereafter referred to as STT) on transaction in specified securities was introduced vide Finance (No.2) Act, 2004. As per the provisions of the STT, recognized stock exchanges, mutual funds (having equity oriented scheme), insurance company or lead merchant banker appointed by the company in respect of an initial public offer or an initial offer are liable to collect the tax on specified securities and pay the same to the credit of the Central Government within seven days from the end of the month in which STT is collected. After its introduction in 2004, the rates of STT have been revised from time to time.

2. Presently, the rate of levy of STT on sale of an option in securities is 0.0625 per cent of the option premium, while the rate of levy of STT on sale of a future in securities is 0.0125 per cent of the price at which such “futures” are traded. The rate of levy of STT on delivery trades in equity shares is 0.1 per cent on both purchase and sale transactions, while in the case of sale of an option in securities where option is exercised, the rate of levy is 0.125% of the intrinsic price (i.e the difference between the settlement price and the strike price) and is payable by the purchaser.

3. There has been an exponential growth of derivative (future and option) markets in recent times and trading in such derivatives accounts for a large proportion of trading in stock exchanges. In view of this exponential growth of the derivative markets, it is proposed to increase the said rates of securities transaction tax on sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such “futures” are traded.

4. This amendment is proposed to be made effective from the 1st day of October, 2024.

[Clause 155]

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Full Text:

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Securities Transaction Tax increase expands levy on options and futures, broadening the taxable derivative market from the Bill's commencement. The Finance (No.2) Act, 2004 is amended to increase Securities Transaction Tax rates: the levy on sale of an option in securities is increased to a higher rate of the option premium and the levy on sale of a futures in securities is increased to a higher rate of the traded futures price. Recognised stock exchanges, specified funds, insurers and lead merchant bankers remain responsible for collecting STT and remitting it to the Central Government within the prescribed monthly timeline. The amendment responds to the growth of derivative trading and is set to commence on the Bill's stated future effective date.