Budget 2022: Nikhil Kamat of Zerodha said, government should abolish STT to encourage new investors

Zerodha co-founder Nikhil Kamath: Zerodha co-founder Nikhil Kamat on Thursday requested the government to consider abolishing the securities transaction tax on equity trade in the Union Budget 2022. The Union Budget will be presented by Finance Minister Nirmala Sitharaman on February 1, 2022.

“The move will give a boost to the capital markets by providing relief from STT on equity trade and encourage new investors to start trading,” he said. “If STT is abolished, the investment industry will benefit as both Long Term Capital Gains (LTCG) and Short Term Capital Gains (STCG) are already in force,” Kamat said.

The co-founder of Zerodha said that if the government does not want to interfere on STT, then it can consider removing the tax on LTCG. Kamat advocated for easing the listing norms as well as tightening the penalties for violation of laws in the country.

Kamat said barriers to entry for listing companies in India are high, but once listed, the penalty for infringement is much lower, leaving retail investors suspicious of higher risk.

“We should look at other ways to promote innovation, while also looking at corporate governance,” Kamat said.

STT is a direct tax levied on the purchase and sale of securities listed on recognized stock exchanges in India. Since 2016, it is 0.1 per cent on delivery based equity trading.

The STT was introduced in 2004, when the then Finance Minister P Chidambaram removed the Long Term Capital Gains Tax (LTCG). Currently, the rate ranges between 0.025 per cent to 0.25 per cent depending on the security traded and the transaction.