The stock market saw a sharp decline today (July 23) after the announcement of the Union Budget by Finance minister Nirmala Sitharaman. Both Sensex and Nifty experienced significant losses. The S&P BSE Sensex dropped below 80,000 while the NSE Nifty fell by 409 points. Three major reasons for the crash in stock market are: STT tax, LTCG & STCG tax change and tax on Share buyback.
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Nirmala Sitharaman raised taxes on capital gains especially the long-term capital gains (LTCG) tax on equities which was increased to 12.5% from the previous 10% and short-term capital gains (STCG) tax which was increased to 20% from 15%. The LTCG tax exemption limit was also raised to ₹1.25 lakh from ₹1 lakh.
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Read more: Economic Survey warns stock market investors against derivatives trading: ‘Can make you feel cheated’
The Finance minister also proposed to increase the rate of securities transaction tax (STT) on futures and options (F&O) trade with the aim to discourage retail investors' participation in the risky instrument, she said.
Read more: Stock market crash: Sensex plunges by over 900 points after Securities Transaction Tax increase proposal in Union Budget
"It is proposed to increase the rates of STT on the sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such futures are traded," she said. This comes after the Economic Survey flagged concerns over rising retail investors' interest in derivative trading.
{{/usCountry}}"It is proposed to increase the rates of STT on the sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such futures are traded," she said. This comes after the Economic Survey flagged concerns over rising retail investors' interest in derivative trading.
{{/usCountry}}Moreover, income from buyback of shares will be taxed at the hands of the recipient, Nirmala Sitharaman announced.