BSE brokers' forum seeks tax incentives

A grouping of BSE brokers has sought various tax incentives from the government, including lower dividend distribution levy and restoration of rebate related to securities transaction tax.
Besides, the BSE Brokers Forum -- which has around 850 members -- has called for exempting commodities transaction brokerage from TDS (Tax Deducted at Source) ambit similar to that being extended to securities transaction brokerage.
In a pre-Budget memorandum submitted to the Finance Ministry, the forum said rebate under Section 88E of the Income Tax Act should be restored.
Earlier, brokers could avail a rebate in the form of deduction from total income coming from other operations, including market transactions. The same was discontinued after assessment year 2009-10 amid concern that the rebate was being misused.

"If the government cannot lower the STT on the ground of revenue loss, the rebate under Section 88E must be restored which will be restricted to tax amount on the profits of dealing in shares," the memorandum said.
The forum has sought reduction in dividend distribution tax saying that would help corporates increase their profits as well as provide greater share of dividends to investors.

Further, it has urged the government to provide exemption to securities transactions from tax audits under the Income Tax Act.
"As the size, volumes and paying profile of this market is completely different than other traditional markets, it is suggested to exempt securities transactions from this provision to save thousands of small investors from hardship of audit because complete record of securities transactions is available with various authorities in electronic form...," it noted.

The forum also said the threshold for securities transaction with respect to AIR (Annual Information Return) reporting should be raised to Rs 25 lakh from the current level of Rs 2 lakh.
"In case of trading, this threshold is too low, and discouraged market participants to trade, so, higher threshold only for delivery base transaction has to be increased," it noted.
Among others, the forum has said the government should look at giving 'industry status' to the stock broking activities as that would help the brokers have access to bank funding.