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Business News/ Politics / Budget may revisit STT to begin its phase-out
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Budget may revisit STT to begin its phase-out

Budget may revisit STT to begin its phase-out

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New Delhi: The Union budget is likely to begin the process of withdrawing the Securities Transaction Tax (STT), which is levied on the sale-purchase of equities, derivatives and equity-oriented funds.

Senior government officials said the budget is likely to make a reference to revisiting the STT.

The process may lead to a gradual phase-out spread over a period of two years. A small rate cut could also make it to next month’s budget, but a complete abolition is unlikely at this stage.

An government official, who didn’t want to be identified, said a formal proposal to this effect had been discussed within the finance ministry as part of the pre-budget consultations.

“We can expect a statement of intent in the budget. Even the revenue department has agreed that there is a better way (to tax securities transactions) than the existing STT regime," the official said.

The official said while the government would want to bring back a long-term capital gains tax on securities, such a move is not possible at this moment unless tax avoidance treaties, like the one with Mauritius, are renegotiated.

“A long-term tax is necessary in order to ensure a level playing field between domestic and foreign investors in tax treatment of securities, but it cannot be done at this point of time", the official said.

The STT issue apart, officials said the budget is likely to clarify the tax treatment of the New Pension System and also bring it on par with long term savings schemes in which the deposits, income and withdrawals are all exempt from income tax.

cnbctv18@livemint.com

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Published: 23 Jun 2009, 12:34 AM IST
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