Budget 2017: Stock brokers urge centre not to increase tax burden

A key demand of trading members is to reduce the dividend distribution tax (DDT) on listed firms

Worried over Prime Minister Narendra Modi remarks at increasing taxes on securities markets, the broking community has urged the government not to increase securities transaction tax (STT) and restore the rebates under long-term capital gains (LTCG).

In a proposal to the government ahead of the Union Budget, the BSE Brokers Forum has said that increase in rate of STT and reduction in tax benefits would lead to double whammy for the capital market participants.

The suggestion comes in the wake of PM speech where he hinted that there is a need to increase the contribution of tax from those who make money from the markets.

Currently, LTCG on the sale of listed securities is exempt from taxes. Meanwhile, short-term capital gains (STCG), profits on sale of shares held for less than 12 months, are taxed at a flat rate of 15%. Besides these, all stock market transactions also attract STT in a range between 0.017% and 0.125%.

According to BSE broker forum, the rates of STT have gone up in recent times and so have the tax rates on STCG. Also, rebate under 80E for traders has been withdrawn.

"The concession under 80E should be re-introduced to avoid disparities between business income and long-term capital gains where STT is paid and collected by stock exchange. We have requested that such tax benefits should be restored and Commodity Transaction Tax (CTT) should be given similar treatment," said Mehul Patel, member, BSE brokers forum.

Another key demand of trading members is to reduce the dividend distribution tax (DDT) on listed firms. According to them, the current levy of DDT along with 10% tax levy on income of more than Rs 10 lakh as dividend has led to the scenario of high incidence of tax on the same income stream, it said.

Besides, broker's forum also suggested modification in Rajiv Gandhi Equity Saving Schemes (RGESS) under Section 80 CCG. It has proposed that the scheme should be in line with Section 80CCF (infrastructure bonds) which provides additional limit of Rs 50,000 over and above section 80C. It also provides lock-in period of three years and the deduction for those investors who invest in public issues. Brokers Forum has a view that this would encourage retail participation in public issues.

It also proposed to have centralised registration under upcoming Goods and Services Tax (GST) regime, as multi-state wise registration and procedural issues would make brokers job cumbersome.

Another national trade body for capital market intermediaries- Association of National Exchanges Members of India (ANMI) has also submitted its demand to the ministry where it had pitched for making Aadhaar card an identity proof document for investors to trade in stock exchanges.

"The CKYC System implemented by CERSAI is another hurdle in which all KYC compliant investor have to re-do the CKYC compliant whereas the template is incomplete and not suitable for stock market investor. It is further disturbed because of only one agency have been granted monopoly for creating database as against multiple agency of KRA, which is a dangerous signal keeping national database with one agency," said S K Rustagi, president, ANMI.

Among other steps proposed to expand and deepen the retail investor-base in the country, ANMI said there was need to give broking business the status of industry. These apart, it also sought clarification on the provision to write-off bad debts by the brokers, as allowed to banks.