As Indian stock markets keep climbing, investors should prepare for important changes coming into effect on October 1 that may influence their trading strategies and profits.
Here are the three major updates:
1. New Transaction Fees on NSE and BSE
The leading stock exchanges, BSE and NSE, are changing their transaction fees for cash and futures trading. These adjustments follow a rule from the markets regulator, Sebi, for a uniform fee structure across all market members. Starting October 1, BSE will charge ₹3,250 for every crore of premium turnover on Sensex and Bankex options. However, transaction fees for other equity derivative contracts will remain the same. For Sensex 50 options and stock options, BSE’s fee will be ₹500 per crore of premium turnover, while there will be no fees for index and stock futures.
The NSE will charge ₹2.97 for every lakh of value traded in the cash market. For equity futures, the fee will be ₹1.73 per lakh of traded value, and for equity options, it will be ₹35.03 per lakh of premium value. In currency derivatives, futures will have a fee of ₹0.35 per lakh of traded value, and options will be charged ₹31.10 per lakh of premium value.
2. Increased Securities Transaction Tax (STT)
This year, Finance Minister Nirmala Sitharaman announced a rise in the securities transaction tax (STT) on Futures & Options trading, effective October 1. The STT for futures trading will go up to 0.02% from the previous 0.0125%, and options trading will be taxed at 0.1%. This increase aims to discourage retail investors from heavily trading in derivatives, which may lead to a drop in market volumes and affect the revenues of exchanges and Sebi.
3. New Tax Rules for Share Buybacks
Starting October 1, income from share buybacks will be taxed as dividends for shareholders, according to the applicable income tax rates. A share buyback occurs when a company repurchases its shares from investors, often viewed as a tax-efficient way to return money to shareholders. This change shifts the tax burden from companies to shareholders, allowing firms to use the funds for other purposes.
Investors should stay informed about these changes to adjust their trading strategies accordingly.
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