Jaitley’s tax proposals dent market sentiments

New Delhi, Feb 29 (IANS) Finance Minister Arun Jaitley’s tax proposals depressed investors’ sentiments at the Indian equity markets on Monday.

Consequently, the barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) ended the day’s trade in the red — down 152 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE), closed the day’s trade lower. It was down 43 points or 0.61 percent to 6,987.05 points.

Both the key Indian indices touched their fresh 52-week lows, after Jaitley proposed to hike the levy on options trading to 0.05 percent.

The finance minister proposed to hike the securities transaction tax (STT) on options trade from 0.017 percent to 0.05 percent in the Union Budget for 2016-17.

Jaitley presented the proposal in the Union Budget which was tabled in parliament on Monday.

“Rate of securities transaction tax in case of ‘Options’ is proposed to be increased from 0.017 percent to 0.05 percent,” Jaitley announced.

The Finance Act, 2004, provides for the enactment of STT on sale of an option in securities, where option is not exercised. The STT is charged at the rate of 0.017 percent on the option premium.

The amendment is expected to take effect from June 1, 2016.

However, the government maintained the rate of levy on cash transactions at 0.12 percent.

According to industry estimates, the government collects around Rs.7,000 crore through STT.

Further, the minister proposed a tax at the rate of 10 percent on gross amount of dividends which are in excess of Rs.10 lakh per annum.

“Dividend Distribution Tax (DDT) uniformly applies to all investors irrespective of their income slabs. This is perceived to distort the fairness and progressive nature of taxes,” the minister informed the Lok Sabha.

“Persons with relatively higher income can bear a higher tax cost. I, therefore, propose that in addition to DDT paid by the companies, tax at the rate of 10 percent of gross amount of dividend will be payable by the recipients, that is, individuals, HUFs (Hindu undivided family) and firms receiving dividend in excess of Rs.10 lakh per annum.”

The budget document the proposal, after the amendments to the Income-tax Act, will be effective from the April 1, 2017.

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