Securities Transaction Tax

Securities transaction tax has raised its importance in global perspective in past few years while the global organizations are trying to control the level of speculation. There is an increase in the level of securities transaction tax on traded quantity of shares and time series behavior of stock returns using the data of the two national stock exchanges. Securities transaction tax is a neat and efficient way of computing tax on profit incurred from the sale of securities, as it virtually nullifies the scope of tax avoidance. Securities Transaction Tax is applicable at different rates on the value of the taxable securities transaction. Taxable securities transaction, payable by both the buyer and the seller, refers to any transaction of securities entered into a recognized stock exchange in India. However, it doesnt have a major impact on the returns of the stock listed on the National Stock Exchange in India whereas it influences the volume of traded shares. Volatility of stock listed on the National Stock Exchange in India is affected by the change in tax level and thus investors switch from large and medium sized stocks to small sized stocks to mitigate the risk. The result of introduction of securities transaction tax has no impact on market volatility and also it does not distort the liquidity in Indian Stock Market and the informational efficiency of the market is not affected by the introduction of STT.

Rachit Gupta B.A.LLB. SEC-B 500012425 R450210091