Indian Tax Revenue From Share Trading Rises 25%

by Mary Swire, Tax-News.com, Hong Kong

22 January 2010

Tax revenue from the Indian Securities Transaction Tax (STT) increased by 25% in the last 10 months, reflecting an all time record performance of the Mumbai stock exchange in 2009.

Chief Income Tax Commissioner for Mumbai, R.K. Singh, announced that the Indian government received INR59.94bn (USD1.3bn) in the 10 months from April to January, compared with INR48.12bn in the same period the previous year. STT is charged at a rate of 0.025% on both sales and purchases of securities over stock exchanges.

Singh reported that Mumbai's budget revenues, 38% of India's total, had been revised upwards from INR1.34 trillion (USD29bn) to INR1.42 trillion.

"The current tax collection growth rate is 7.6% over the last year. We need 14% growth to meet the original target and 20% to meet the revised target. But the good news is our (economic) growth rate has increased," Singh said.

Singh added that the total tax collection had grown eight-fold in the last 10 years, and over the same period direct tax as a proportion of GDP had increased from 2.68% to 6.56%.

In 2009, the benchmark Bombay Stock Exchange Sensitive Index, BSE Sensex, recorded an 81.03% rise, the fourth best worldwide after Sri Lanka (125%), Indonesia’s Jakarta Composite (87%) and Brazil’s Bovespa (82%). The Sensex beat the Shanghai Composite Index, which rose 80%. The bull market starting in March followed a record fall of 52% in 2008.

Capital inflows for 2009 were estimated at USD17.46bn during 2009, compared to the 2007 record of USD17.78bn. Ajay Pandey, assistant vice-president at Intime Spectrum Securities, advised the Business Times that unparalleled money supply growth had been a key driver and foreign institutional investors were boosted by the election verdict of May 2009.

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