The removal of Securities Transaction Tax (STT) proposed in the new Direct Taxes Code may prove beneficial for market players as it may bring back strong volumes, analysts said.
"The abolishment of STT would be beneficial for brokers and day-traders, for whom the cost of transactions had increased considerably, and strong volumes may come back if it is removed," Purpleline Investment Advisors CEO P K Agarwal said.
Finance Minister Pranab Mukherjee today released the Direct Taxes Code that would ultimately replace the over four-decades old Income Tax Act and bring all other direct taxes like wealth tax under its purview, if reasonable level of discussion happens on the code, a bill could be placed in the winter session of Parliament.
The radical tax reforms proposed include an abolition of the controversial STT and reintroduction of tax on long term capital gains on securities trading.
Echoing similar sentiments, SMC Global Vice-President Rajesh Jain said, "Removal of STT may bring back strong volumes in the market and may be beneficial for day traders and brokers but long term investors may suffer but that depends which tax is introduced eventually."
Bonanza Portfolio Assistant VP Avinash Gupta said, "The proposal of removal of STT may be beneficial for the market and if the tax introduced in its place is at a lower rate it will be helpful."