Benchmark indices fell as the government proposed increases in taxes on capital gains and derivatives trading. As of 12:31 pm, both the NSE Nifty 50 and the S&P BSE Sensex had dropped by approximately 1.6 %.
Finance Minister Nirmala Sitharaman announced that the tax rate for equity investments held for less than a year would rise to 20% from 15 %. Additionally, the tax rate for shares held for more than 12 months would increase to 12.5 % from 10 %. The government also increased the tax on transactions in the equity derivatives segment.
For futures trading, the securities transaction tax has been increased to 0.02 % from 0.0125 %, and for options, it has been raised to 0.1 % from 0.0625 %. ‘The market was not anticipating negative surprises in areas like capital gains tax and securities transaction tax’, remarked Krishna Appala, a senior research analyst at CapitalMind Research.
‘The tax changes are a short-term negative for the market’, said Trideep Bhattacharya, chief investment officer at Edelweiss Mutual Fund. ‘The tax increase is marginal but will help bring in rationality on options trading exuberance and will better investment behavior. The increase in capital gains will push investors towards long-term investing.
Meanwhile, Union Finance Minister Nirmala Sitharaman announced an increase in the standard deduction to ₹75,000 from the current ₹50,000 under the new tax regime. This change allows salaried employees to save ₹17,500 in income tax.
ALSO READ: FM Sitharaman Increases Standard Deduction in New Tax Regime
Comments