ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Securities Transaction Tax

Though the empirical literature does not support the imposition of a Securities Transaction Tax, many countries levy STT either as a substitute for capital gains tax or as an independent tax for revenue consideration. In India, the STT was introduced for the first time by the government in the union budget for 2004-05. However, the revenue potential of the revised STT is limited and if the revenue loss on account of the reduction in capital gains tax is deducted, it is even lower. There is scope to rationalise the STT in India. The short-term capital gains tax on securities can be abolished altogether. A uniform STT, of 0.05 per cent each on buyers and sellers of all equity transactions, together with a 0.01 per cent STT on derivative sales is likely to yield higher gross (net) revenues.

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