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FM cuts transaction tax to 0.1%
July 21, 2004 15:37 IST
Last Updated: July 21, 2004 15:57 IST
Finance Minister P Chidambaram on Wednesday exempted bonds from the new transaction tax and reduced the levy on day traders and arbitrageurs from 0.15 per cent to 0.1 per cent.
Announcing the changes in the transaction tax in his reply to the discussion on the Annual Budget in the Lok Sabha, Chidambaram said the 0.15 per cent fixed transaction tax on all securities has now been replaced by differential rates.
He said those securities, which attract 0.15 per cent transaction tax will continue to be exempt from the Long Term Capital Gains tax and attract 10 per cent Short Term Capital Gains tax.
Giving the rationale behind the introduction of the transaction tax, Chidambaram said it was neat, efficient and easy to administer and above all eliminated tax avoidance.
Referring to the demand that the new tax be dispensed with, he said people have to be brought into tax net and in this context it was not being withdrawn.
However, after consultations with market watchdog Securities and Exchange Board of India and other stakeholders, it was decided that the government would have differential rates and exempt bonds where the profit margins were wafer thin.
For delivery based transactions, Chidambaram said 0.15 per cent tax remained but it would be shared equally by buyers as well as sellers.
Transactions in derivatives will now attract 0.10 per cent tax instead of the original proposal of 0.15 per cent, he said.
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