Stock market investors take note! As Indian markets continue their upward trajectory, investors should take note of three important changes that will come into effect on October 1, 2024 potentially influencing their trading strategies and profitability.
We take a look at the three changes that stock market investors should be aware of:
New NSE, BSE transaction charges from October 1, 2024
The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), India’s leading stock exchanges, have announced changes to their transaction fees for cash, futures, and options trading.These revisions, effective from October 1, are in response to a mandate from the Securities and Exchange Board of India (Sebi) requiring a standardized flat fee structure for all members of market infrastructure institutions.
BSE has adjusted the transaction fees for Sensex and Bankex options contracts in the equity derivatives segment to Rs 3,250 per crore of premium turnover. However, the transaction charges for other contracts in the equity derivatives segment remain unchanged.
For Sensex 50 options and stock options, BSE charges a transaction fee of Rs 500 per crore of premium turnover. There is no transaction fee applicable for index and stock futures.
As per NSE’s announcement, the transaction fee for the cash market will be set at Rs 2.97 per lakh of traded value. Equity futures will attract a fee of Rs 1.73 per lakh of traded value, while equity options will have a fee of Rs 35.03 per lakh of premium value.
In the currency derivatives segment, futures will be subject to a fee of Rs 0.35 per lakh of traded value. Options, including interest rate options, will incur a fee of Rs 31.10 per lakh of premium value.
Securities Transaction Tax Hiked
Another significant change is the increase in the securities transaction tax (STT) on Futures & Options (F&O) trading, as announced by Finance Minister Sitharaman earlier this year. Effective from October 1, trading in futures will attract an STT of 0.02%, up from 0.0125%, and options trading will be taxed at 0.1%.
This hike in STT was introduced as a disincentive for investors following a substantial increase in retail derivative trading. Analysts suggest that the increased STT may impact market volumes and depth, potentially affecting the revenues of exchanges and Sebi.
Changes in buyback taxation
Furthermore, the taxation rules governing share buybacks have been revamped. From October 1, income from share buybacks will be treated similarly to dividends and taxed in the hands of shareholders according to their applicable income tax slabs.
Share buybacks, a process where a company repurchases its own shares from shareholders, have been considered a tax-efficient method of returning cash to investors. The new changes aim to shift the tax burden from corporates to shareholders, allowing companies to allocate funds for other purposes.
