A cut in commodity transaction tax (CTT), dividend distribution tax (DDT) and rationalisation of difference between short-term capital gains tax (STCG) and long-term capital gains tax (LTCG) are likely to be part of market-related measures in the upcoming Union Budget, sources in the know of recommendations received by the Finance Ministry told BusinessLine .
Finance Minister Nirmala Sitharaman is expected to announce her first full Budget on February 1. The Budget may announce the market-friendly measures keeping in mind the disinvestment of public sector units (PSUs), for which a sentiment booster was necessary, the sources said.
CTT is applicable at the rate of 0.01 per cent in the commodity derivative segment, except on exchange-traded agricultural commodities that are specifically exempted from it. This works out to ₹1,000 for every ₹1 crore worth of trade. The same on premium of commodity options is 0.05 per cent. Lobby groups have told the government that India’s exchange-traded commodity market was the steepest in terms of trading cost.
DDT has to be deducted by listed companies before they pay dividend to shareholders. The rate is 15 per cent on the gross of aggregate dividends but the effective rate including surcharge and education cess works out to around 20 per cent. According to regulatory sources, SEBI has told the Finance Ministry that a sharp cut in DDT or doing away with it could bring in incremental foreign flows into the stock market.