Govt Passes Finance Bill 2023; Raises Securities Transaction Tax on Futures & Options by Up To 25%

Passing the Finance Bill, the central government has raised the securities transaction tax (STT) on the sale of F&O contracts by up to 25 per cent. On the sale of options contracts, STT will now be Rs 2,100 on a turnover of Rs 1 crore, against Rs 1,700 earlier, which shows a 23.5 per cent hike.

According to the amendments to the Finance Bill, 2023, STT on the sale of futures contract has been increased to Rs 12,500 on a turnover of Rs 1 crore, a 25 per cent hike as compared with Rs 10,000 earlier.

The Lok Sabha on Friday, March 24, passed the Finance Bill, 2023, with amendments. The Finance Bill 2023, which contains various proposals related to taxation and government spending, has been passed with several amendments and 20 more Sections have been added to the Bill.

The Finance Bill is part of the Budget process.

The Finance Bill, 2023, also imposes the short-term capital gains tax on specified mutual funds (where not more than 35 per cent is invested in equity shares of domestic companies) that are bought on or after April 1, 2023.

Also, no relief for startups has been provided on angel tax provision.

Gouri Puri, Partner, Shardul Amarchand Mangaldas & Co, said, “In a surprise move, the Government has increased the withholding tax rate on royalties and fee for technical services paid to non-residents from 10 per cent to 20 per cent under India’s domestic tax law. Tax treaty benefits will become more critical now to avail a reduced withholding tax rate. Foreign entities will need to evaluate their commercial substance to be able to claim such treaty benefits. This may also increase the cost of import of technology in cases where Indian companies are grossing up withholding taxes and treaty benefits are not available.”

What Is Securities Transaction Tax?

Securities transaction tax (STT), which is similar to tax collected at source (TCS), is a direct tax levied on the sale and purchase of securities that are listed on stock exchanges in India. STT is governed by Securities Transaction Tax Act (STT Act) and STT Act has specifically listed down various taxable securities transaction i.e., transaction on which STT is leviable.

When an investor buys or sells shares on the stock market, he/ she needs to pay STT. The tax rate is different for both intraday trading and delivery.

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