Govt exempts some bond deals from transaction tax

Securities trades routed through RBI's Negotiated Dealing System are exempt from 0.15 % transaction tax proposed in Budget 2004.

Securities trades routed through the Reserve Bank of India's Negotiated Dealing System (NDS) are exempt from a 0.15 per cent transaction tax proposed in the Budget 2004-05, chief economic adviser to the Government Ashok Lahiri said on Friday.

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"Right now, the transaction tax is only for purchases on recognised stock exchanges and it is not applicable on the NDS," Lahiri told reporters. "But it is an issue," he added, without elaborating.

Finance Minister Palaniappan Chidambaram imposed the transaction tax on all securities purchased on the stock exchanges in Budget unveiled on Thursday.

Lahiri said the proposed tax, which would be applicable once the Finance Bill was passed by Parliament, was aimed at curbing "very, very short-term speculative trades".

Lahiri said the transaction tax would be applicable on Government and corporate bond purchases made on the stock exchange, but added primary dealers and brokers would be exempt from the tax if they were buying on behalf of their clients.

His comments came after Chidambaram told reporters the new tax would not apply to business income, which lifted the 30-share Bombay Stock Exchange index -- Sensex.