Hyderabad: The stock market witnessed a sharp decline, with both Sensex and Nifty registering losses, amid the presentation of the Union Budget on Tuesday.
There were five announcements that came as major shock for Dalal Street. This includes the doubling of the STT rate on equity and index trades, raising Long Term Capital Gain (LTCG) tax from 10 to 12.50 percent and Short Term Capital Gain (STCG) from 15 to 20 percent. The five blows stock market received are as follows:
1. STT Rate on Derivative Trade:
In her Budget speech, Sitharaman increased the STT rate for equity and index trades from 0.01 per cent to 0.02 percent. She said that the STT on futures and options of securities is proposed to be increased to 0.02 and 0.1 percent, respectively.
What is a derivative trade?
A derivative is a formal financial contract that allows an investor to buy and sell an asset for a future date. The expiry date of a derivative contract is fixed and pre-determined. Trading derivatives in the stock market is better than buying assets because the profits can increase substantially.
2. Hike in STCG tax:
The Finance Minister has increased the Short Term Capital Gain (STCG) tax from 15 to 20 percent. She said that short-term gains on certain financial assets will now attract a tax rate of 20 per cent while all other financial assets and non-financial assets will continue to attract the applicable tax rate.
3. Changes in LTCG tax:
Sitharaman further increased the Long Term Capital Gain (LTCG) tax from 10 to 12.50 percent. The Finance Minister said that a tax rate of 12.5 percent will be applicable on long-term gains on all financial and non-financial assets.
4. Classification of Listed Non-Listed Assets:
Sitharaman extended the time period for classification of unlisted assets from one year to two years, while excluding listed assets, including equities, from consideration.
5. Change in tax rules on re-purchase of shares:
Sitharaman proposed to tax the income received on the buyback of shares in the hands of the recipient. In the current tax regime, shareholders are exempted from any income tax on the income from the buyback of shares.
Read more
