Budget: Centre proposes to increase STT, capital gains tax

Finance Minister Nirmala Sithraman on Tuesday said the government has decided to increase the rate of securities transaction tax (STT) on futures and options (F&O) trade.

"It is proposed to increase the rates of STT on the 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," she said in the Union Budget speech.

Nirmala Sitharaman's announcement came a day after the Economic Survey flagged concerns over rising retail investors' interest in derivative trading.

The survey, which gives an overview of the state of the economy, said speculative trade has no place in a developing country.

The survey said derivate trading promotes humans' gambling instincts as they hold the potential for outsized gains.

"These considerations are likely driving active retail participation in derivatives trading," it said.

Meanwhile, Sitharaman also announced an increase in both long-term and short-term capital gains tax.

Any profit or gain that arises from the sale of a 'capital asset' can be categorized as a capital gains tax.

Also read: Budget 2024: New tax regime slabs revised, standard deductions hiked by ₹25,000

Sitharaman announced that short-term capital gains on "specified" financial assets will henceforth attract a tax rate of 20 per cent instead of 15 per cent.

Long-term gains on all financial and non-financial assets will attract a tax rate of 12.5 per cent instead of 10.0 per cent.

Listed financial assets held for more than a year are classified as long-term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term.

"Unlisted bonds and debentures, debt mutual funds and market-linked debentures, irrespective of the holding period, however, will attract tax on capital gains at applicable rates," Sitharaman said.

To boost the startup sector, Nirmala Sitharaman proposed to abolish the so-called angel tax for all classes of investors.

Meanwhile, former finance minister P Chidambaram lauded Nirmala Sitharaman, saying he was pleased to hear that she will abolish the Angle Tax.