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India Has No Plans To Reduce STT

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

29 November 2011


The Indian government has no plans to lower the securities transaction tax (STT), according to the Minister of State for Finance S.S. Palanimanickam.

The tax, which was brought into force in October, 2004 has been the target of lobbying by traders in the recent months. They argue that the reduction, or even the complete removal, of STT will help to revive the lacklustre stock market by encouraging higher investment.

STT was introduced to stop avoidance of capital gains tax through non-declaration of gains. Normally it is payable both when shares and other securities are purchased and sold and is added to the price during the transaction, and can vary from 0.017% to 0.25%, depending on the type of security which is being traded.

The Minister stated that that STT receipts had declined by around 18% to INR29.6bn (USD568m) during the first sixth months of the current fiscal year.

Investors have demanded a change to the STT since it was first introduced because they say this tax combined with stamp duty, service tax and other charges, makes India one of the most expensive markets as far as transaction costs go.

There have been proposals in the past to remove the levy, including in the forthcoming Direct Taxes Code, but the government then decided against the idea.

TAGS: capital gains tax (CGT) | tax | investment | India | capital markets | equity investment | tax reform

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