Finance Minister P Chidambaram on Friday introduced commodities transaction tax (CTT) on futures and options traded on commodity exchanges in line with the securities transaction tax.

"Transaction in commodity futures have come of age. Hence, I propose to introduce CTT on the same lines as STT on options and futures," FM said, while presenting the Budget for 2008-09.

CTT is proposed to be levied on taxable commodities transactions (which means transaction of purchase and sale) entered in a recognised association of option in goods or option in commodity derivative or any other commodity derivative.

The commodity market regulator, FMC Chairman said, "Bringing CTT on options when the instrument has not yet been launched would discourage the growth of option trading."

Currently, futures are allowed to trade on 23 commodity bourses that are operating in the country. According to the proposal, a seller would pay 0.017 per cent on option premium if he sells an option in goods or an option in commodity derivative.

For the sale of any other commodity derivative, the seller would pay 0.017 per cent of the price at which commodity derivative is sold. Meanwhile, the purchaser would be charged 0.125 per cent on the settlement price of the option if he sells an option in goods or option in commodity derivative, where option is excercised.

It has proposed to amend Section 36 of the Income Tax Act to provide any amount of CTT paid by the assessee during the year would be allowed as deduction subject to the condition that the income from taxable commodities transactions is included under the head 'profits and gains of business or profession'.

The amendment would take effect from April 1, 2009 and would accordingly apply in relation to assessment year 2009-10 and subsequent assessment years.

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