Brokers send 7-point budget wishlist to Sebi; removal of LTCG among demands

Brokers have demanded an increase of limit of investment, exemption of interest from levy of GST and abolition of stamp duty on stock exchange transactions

Stock brokers have sent a seven-point budget wishlist to the market regulator Securities and Exchange Board of India (Sebi). Among the changes sought are a rationalisation of securities transaction tax (STT), exemption from long-term capital gains (LTCG) tax and withdrawal of dividend distribution tax (DTT).

The Association of National Exchanges Members of India (Anmi) and Bombay Stock Exchange Brokers Forum have submitted the budget memorandum to the Sebi chairman requesting it to be included in the budget recommendations the market regulator sends to the finance ministry. 

“We would like to state that extensive thought process has been put in and we as associations have pondered over each and every suggestions and demand received from our members,” Anmi and Brokers Forum have written to Sebi.

Brokers say the additional STT charged on the exercise of options needs a re-think as it is leading to “inefficient pricing” at the time of settlement. An additional STT at the rate of 0.125 per cent is levied on option contracts are exercised. 

Further, the brokers’ bodies have said there has been an increase in the rate of STT, withdrawal of tax rebate and an introduction of GST without subsuming of statutory levies applicable to stock exchange transactions. 

If this is done volumes will get a boost and in turn, will lead to an increase in government revenue. 

Another key demand is the exemption of LTCG tax on securities held for over three years. Interestingly, 10 per cent LTCG  has been introduced this fiscal itself. Earlier, gains made on the sale of shares held for a period of one year or more were exempt from taxes.

“It is pertinent to mention that in India, the percentage of total population investing in stock exchange-traded instruments is abysmally low. Hence, there is need to attract and incentivise the investors for holding the investment for long-term so as to attract conventional investors who invest in gold, fixed return instruments or real estate,” the letter to Sebi says.

The brokers' body believes the imposition of DTT is adversarial and needs to be withdrawn.

“The present form of adversarial taxation on a dividend of around 20 per cent results into triple taxation of corporate earnings. The tax on the dividend should be in the form of equalisation to balance the difference between corporate and personal tax. Hence, it is recommended that DTT be withdrawn and the tax should be levied at 10 per cent on the recipient,” the letter says.

Besides, the brokers have demanded an increase of limit of investment under Section 54EC of the Income Tax Act, exemption of interest from the levy of GST and abolition of stamp duty on stock exchange transactions.

7-point agenda 

• Rationalisation of STT

• Reintroduction of rebate under Section 88E for STT paid

• Exemption of LTCG on securities held for over three years

• Withdrawal of DTT

• Increase in investment limit under Section 54EC

• Exemption of interest levy on GST

• Abolition of stamp duty on stock exchange transactions