NEW DELHI (Reuters) -India has raised the securities transaction tax (STT) on futures and options contracts, the government said in amendments to the finance bill, 2023, passed on Friday.
STT on options contracts were raised to 0.0625% from 0.05%, the finance ministry said, correcting figures issued in the finance bill earlier in the day.
“There was a typographical error which is being corrected,” the finance ministry said in a statement.
The finance ministry had earlier said STT for options contracts would rise to 0.021% from 0.017%.
STT for futures has been raised to 0.0125% from 0.01%, the ministry said.
The hikes would be effective from April 1.
“The increase in STT will specially impact high-frequency traders (HFTs). Any change in the cost structure has a material impact due to the thin spread in which HFTs operate,” said Rajesh Gandhi, partner, Deloitte Haskins and Sells LLP.
Moreover, foreign portfolio investors do not get a deduction for STT while computing capital gains on derivatives, Gandhi said.
While there could be some impact on the volume of trading by foreign investors, overall market volumes may not be impacted, said Shyam Sekhar, founder of iThought, a SEBI-registered investment advisory firm.
(Reporting by Aftab Ahmed, Nikunj Ohri and Jayshree P. Upadhyay; Editing by Savio D’Souza, Sohini Goswami and Nivedita Bhattacharjee)