Rate on delivered equity trades may be retained

Transaction tax may be cut for day traders, bond dealers.

Finance Minister P Chidambaram is set to retain the 0.15 per cent transaction tax rate on delivery-based equity trades. These account for about 20 per cent of the daily turnover in value terms and about 33-35 per cent in volume terms.

Senior government sources said Chidambaram would, however, substantially prune the transaction tax rate for day traders and bond dealers.

"In the review exercise, the finance ministry's endeavour has been to avoid a clutter of rates in the capital markets," a source said.

Though the new "face-saving formula" would lead to a differential rate regime, it was expected to make all sections of the capital markets happy, he added.

The Budget had proposed an uniform 0.15 per cent tax on all debt and equity purchases through recognised stock exchanges. It had, however, not brought debt deals under the negotiated dealing system (NDS) under the tax net.

"This anomaly will also be addressed and a lower rate will be proposed for both the wholesale debt market (WDM) and the NDS segments," the source said.

Day traders and arbitrageurs, whose transactions do not result in delivery, contribute significantly to the liquidity in the equity markets, accounting for almost 75-80 per cent of the Rs 6,000 crore average daily turnover in the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). They can expect a reprieve tomorrow.

According to primary dealers, the total turnover in the debt market in the last financial year was Rs 20 lakh crore. The WDM segment of the NSE and the BSE accounted for almost 65-70 per cent of the annual turnover. The NDS segment, where trading is not routed through stock exchanges, accounted for the balance.