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Broking shares fall 2-5% as Budget 2024-25 hikes LTCG and STT rates

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Broking shares took a hit following Finance Minister Nirmala Sitharaman’s announcement of increased long-term capital gains tax (LTCG) and Securities Transaction Tax (STT) in the Budget 2024-25. Leading broking firms like Motilal Oswal Financial Services, 5paisa, ICICI Securities, Angel One, IIFL Securities, and Geojit Financial Services saw their shares fall by 2-5 percent post-announcement.

The Union Budget for 2024-25 has increased the LTCG tax rate from 10 percent to 12.5 percent on specified financial assets. Additionally, the short-term capital gains tax has been raised to 20 percent.

The STT on the sale of an option in securities has been hiked from 0.0625 percent to 0.1 percent of the option premium. For the sale of futures in securities, the STT has been increased from 0.0125 percent to 0.02 percent of the trading price. The increase in STT is expected to lower trading volumes, as higher overall trading costs may discourage frequent trading. The rise in LTCG and STCG has also added to the market’s concerns.

The Budget 2024-25’s tax revisions have introduced new dynamics to the financial markets. While the government’s intent to raise revenue is clear, the immediate effect has been a drop in broking shares and a potential shift in trading behaviors. Investors and market participants will be closely watching the market’s response to these changes in the coming months.

 

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