The Hindu Business Line : Brokerages wish for no extra burden on investors

“Broadly, we would expect the Budget not to increase any kind of burden on investors, as the equity culture in India is yet to gain wide spread acceptance. Our expectation is that the Securities Transaction Tax (STT) is not raised further as this would increase the cost for an investor,” Mr Dinesh Thakkar, CMD, Angel Broking, said.

Tax collections

STT — introduced just a few years ago by the Union Finance Minister, Mr P. Chidambaram — turned out to be a good source of direct tax for the Government and it also contributed towards achieving the targets in the current fiscal.

This year, STT mop up has already touched Rs 4,266 crore as per the third quarter data for the present financial year and may cross Rs 5,000-crore mark when the fourth quarter collections are completed. Thanks to the boom in the equity market, last year (2006-07) total STT collection was Rs 4,648 crore, a figure unexpected off when it was introduced.

Since STT has already been making good contribution to the overall tax basket, a raise in STT would be a negative surprise, a leading brokerage house said.

“For the stock markets, we do not expect any major negative surprises apart from the expected STT increase. Changes in direct and indirect taxes, however, do have the ability to impact the market sentiment,” spokesperson for Religare Securities said.

“STT is a success story from the point of revenue increase, and the Government is expected to encash the same further this year,” said Mr R. Swaminathan, Vice-President, IDBI Capital Market Services.

Dividend tax

Religare felt that some reduction or elimination of dividend distribution tax was going to be one of the key features of this Budget. Mehta Equities expected revision in capital gains tax norms whereby trading and investing in the stock market were differentiated.

“The calculation of capital gains tax should, by considering a holding period of less than 15 days to, be treated as capital gains from trading. Holding period of 15 to 179 days should be treated as short-term capital gains and holding period above 180 days or more should be considered as long-term capital gains,” the broking firm said.

Disposable income

The impressive direct tax collections have led to a general feeling that Mr Chidambaram may tinker with the income tax slabs in favour of the common man.

“It is expected that there would be reduction in income tax so that the take home income not only neutralises the inflation but also leaves little more disposable income in the hands of households. It would increase the investible surplus with households,” another broking firm Bonanza Portfolio said.

Taxation issues

The short selling, which was supposed to start by the first week of February, has got stuck with CBDT on ground of taxation issues related to stock borrowing and lending.

“It is hoped that the Budget would give clarity on the tax treatment of transactions relating to stock borrowing and lending as well as short selling. Clarity on these issues would make the lending and borrowing of shares a reality,” Bonanza Portfolio said.

More Stories on : Financial Services | Stock Markets | Budget

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page