Via a notification, the Central Government has informed that uniform Stamp duty would begin from April 1, 2020. The government has notified uniform stamp duty rates “much lower than earlier” across states for trading in stocks, derivatives, currencies and commodities. The initiative that will soon become operational will help curb the problem of varied stamp duty collection rates. Stamp duty will be charged uniformly irrespective of the state of residence effective from April 1, 2020.
Until now, stamp duty was charged at different rates based on your resident state. We (brokerage firms) used to collect from you and pay it monthly to the respective state government. Going forward, we will collect and pay it to the exchanges that will, in turn, pass it back to the Central government. The notification also makes it easier for consolidated payments through the exchanges where the products are traded. At present, brokers have to comply with stamp duty payments under the rates levied by states.
The new rate will benefit currency traders most as it will come down from Rs 200 to just Rs 10 per Rs 1 crore of trade. According to a Corporate law site ‘Corporate Professionals’, the central government aims to bring sale or transfer of securities through electronic mode within the ambit of stamp duty and create additional revenue to the state governments and also lay at rest certain ambiguities in the law with the amendments to the Stamp Act. The single rate and Centralised system will help streamline the entire process, reduce the cost of collection and plug revenue leakage. But it will lead to increase in cost of trading in securities as transactions specifically on stock exchanges are subject to the securities transaction tax. Most states charge between Rs 200 and Rs 300 for non-delivery (intra-day) trades in the equity segment. This will now be at a uniform rate of Rs 300. For all delivery-based trades, the rate will be Rs 1,500. The new rates will be lower for active equity traders from states like Tamil Nadu and Goa and Union Territories such as J&K and Ladakh. Also, for equity investors, the new rate will be Rs 1,500 per Rs 1 crore of trades, to be paid by buyers only. Earlier both, buyers and sellers used to pay stamp duty.
Many states levied stamp duty of around Rs 250-300 on Rs 1 crore intra-day and derivative trades. This has now been fixed at Rs 300 for intra-day and Rs 200 for derivative per Rs 1 crore. On delivery based trades, the stamp duty has been fixed at Rs 1,500 per crore on the buy side. It’s now Rs 750 on each buy and sell side. The same for options trading is Rs 300 and Rs 10 for currency segment trading on every crore. Also, brokers will no longer have to worry about depositing stamp duty to states that will now be done by stock and commodity exchanges. The move was announced in the budget by Finance Minister Nirmala Sitharaman this year but is being implemented only now. The government has notified uniform stamp duty rates “much lower than earlier” across states for trading in stocks, derivatives, currencies and commodities. It was to be implemented on January 9, this year but it got postponed. The notification also makes it easier for consolidated payments through the exchanges where the products are traded. At present, brokers have to comply with stamp duty payments under the rates levied by states.
New stamp duty rate-
- Delivery equity trades: 0.015% or Rs 1500 per crore on buy-side
- Intraday equity trades: 0.003% or Rs 300 per crore on buy-side
- Futures (equity and commodity): 0.002% or Rs 200 per crore on buy-side
- Options (equity and commodity): 0.003% or Rs 300 per crore on buy-side
- Currency: 0.0001% or Rs 10 per crore on buy-side
The new rates are only on the buy-side and not on both buy and sell-side. So, stamp duty costs for most of you will reduce by over 50 per cent. Active traders who were residing in states which had a cap on maximum stamp duty per day per contract note will not enjoy the benefit of the cap going forward, hence will be negatively affected. There was no stamp duty earlier for offline transfer of shares using DIS (delivery instruction slip). Now these will be based on the consideration amount entered on the DIS slip at the same rates as delivery trades (0.015 per cent or Rs 1500 per crore on buy-side).
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