Tax on non-STT deals worries market

Wide ranging off-market activities could have to forgo benefit of nil long-term capital gains tax

The Union Budget proposal to levy 10 per cent long-term capital gains (LTCG) tax on equity shares acquired by not paying the Securities Transaction Tax (STT) has raised uncertainty in the capital markets.

Experts and tax consultants feel there is now uncertainty on wide ranging off-market transactions such as mergers and acquisitions (M&A), private placements, employee stock options (ESOPs) and private equity (PE) investments in unlisted companies.

Introduced in 2004, STT has to be paid on all securities transactions on the stock exchange platform, in lieu of zero tax on LTCG. In a surprise move, the government now wants investors who haven't