By TIOL News Service

NEW DELHI, Feb 28, 2006 : THOUGH Mr PC has very little for direct taxes in his budget proposals but he does have a hiked rate for securities transactions. Under the existing provisions sale or purchase of units of an equity oriented fund is liable to securities transaction tax at the rates specified under that section 98 of Finace Act 2004. The present finance bill proposes to change the percentage investible funds of total proceeds of equity-oriented fund to sixty per cent. Presently the upper limit is 50 per cent.

The Finance Bill also proposes to amend charge of securities transaction tax. For purchase of an equity share in a company or a unit of an equity-oriented fund it proposes 0.125 per cent tax to be paid by the Purchaser. Similarly, on sale of an equity share in a company or a unit of an equity oriented fund where the transaction of such sale is entered into in a recognised stock exchange a tax of 0.125 per cent will be charged from the sellers.

As far as sale of a derivative, where the transaction of such sale is entered into in a recognised stock exchange a tax of 0.017 per cent will be leviable from the sellers of the derivative. Where as tax of 0.25 per cent will be charged on sale of a unit of an equity oriented fund to the Mutual fund.

So overall the taxation rate has been enhanced on the whole gamut of securities transaction. It would have been a major issue of discussion if the stock market had not been in such a high growth path. But in the boom time no one seems to be bothered about the crucial part of direct taxes. Nevertheless, by increasing the tax rates in securities transaction the finance minister has made provision for excequer's share in the boom on stock market.

TABLE: Proposed rates of securities transaction tax