The Indian financial markets will witness significant changes on October 1 as new rules will come into force, including a new tax regime for share buybacks, transaction fees for brokers, and securities transaction tax (STT) on futures & options (F&O). Additionally, the securities and exchange board of India’s (SEBI) new regulations for trading bonus shares will be effective from October 1.
Four key changes for investors to keep an eye on
1. New tax regime for buyback of shares
The Union finance minister announced a new tax regime for share buybacks that will come into force on October 1. The rules under the tax regime will shift the tax burden from companies to shareholders. The 20 per cent tax on buybacks paid by companies will be eliminated, and shareholders will be taxed on buyback proceeds as divided income according to their respective tax slabs. Additionally, companies will be required to deduct tax at source (TDS) on buyback proceeds at a rate of 10 per cent for resident individuals and 20 per cent for non-resident individuals.
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2. NSE and BSE revised transaction fees for brokers
The capital markets regulator in July notified changes in transaction fee structures charged by the national stock exchange (NSE) and Bombay stock exchange (BSE) for brokers across segments. NSE for trades in the cash market will charge a fee of Rs 2.97 per lakh of traded value on each side. In equity futures, the fee will be Rs 1.73 per lakh on each side and for equity options, it will be Rs 35.03 per lakh of premium value. While BSE’s transaction fees for Sensex and Bankex options contracts will rise to Rs 3,250 per crore of premium turnover value.
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3. Increased securities transaction tax on F&O
Another key change introduced by FM Sitharaman in the 2024 budget was an increase in securities transaction tax (STT) on futures and options (F&O) trading, which will start from today.
“It is proposed to increase the rates of STT on sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such futures are traded,” said FM Sitharaman in her 2024 Budget speech.
4. New T+2 days bonus share Trading Regulation
Earlier in September, Sebi introduced new rules for trading bonus shares, applicable from October 1. As per the guidelines, the bonus shares will be credited to shareholders’ accounts for trading within two days from the record date as compared to its present time frame of nearly two weeks. The new rules will enable more efficient and timely trading of bonus shares. Moreover, failure to abide by the rules will attract penalties.
“As a part of the continuing endeavor to streamline the process of bonus issue of equity shares, in consultation with the market participants, it has been decided to reduce the time taken for credit of bonus shares and trading of such shares, from the record date of the bonus issue...,” said the regulator in a circular.
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