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Zerodha Founder on STT: STT should be reduced in the budget, Nitin Kamath said, traders are suffering huge losses due to high cost of transactions

Zerodha Founder Nithin Kamath on STT: According to the founder of Zerodha, if a retail investor has Rs 5 lakh in his account and does derivative trading with some leverage, then the burden of STT on him becomes so much that he can easily profit. Can’t earn

Budget 2022 Expectations, Zerodha Founder Nithin Kamath on STT: It is expected from the central government that this time it will definitely fulfill the demand of reducing Security Transaction Tax (STT) in its new budget. This is to say of the co-founder of Zerodha, Nithin Kamath. He has presented his arguments very strongly in support of this demand, saying that traders trading in the stock markets of the country have to lose huge amount in the form of transaction cost and impact cost. They claim that the amount of loss that traders suffer in these items is not even in the trading of the market.

Expected to reduce STT for one and a half decade: Kamath

Nitin Kamath has put forth his opinion about this through Twitter. He wrote in his tweet, “For more than the last 15 years, I expect every budget day that STT will be reduced. Only Zerodha customers have to pay around Rs 2500 crore every year as STT, GST and stamp duty. Overall, traders have to bear more economic losses than the market in the form of transaction costs and impact costs.”

STT started in 2004 after LTCG was removed

Kamath, while presenting his arguments in support of reducing these costs, further wrote, “Reducing the transaction cost improves liquidity, which also reduces the impact cost. You can argue that if this happens, people will start doing more speculation, which will not be right. It is an argument, but there has to be a balance between the two situations. I am hoping that the STT will be reduced this year.” Significantly, in 2004, the then Finance Minister P Chidambaram introduced the Security Transaction Tax while removing the Long Term Capital Gains Tax (LTCG). Kamath says that the stock exchanges collect STT only at the time of trading, so collecting it for the government proves to be much easier than charging LTCG. The collection of LTCG takes place only when the investor himself pays the tax by giving his information.

LTCG returned in 2018 budget, but STT did not reduce

It is worth noting that LTCG was removed while bringing STT, but in the 2018 budget, the central government reintroduced 10 per cent LTCG on profit above Rs 1 lakh. However, no deduction was made in STT. Nitin Kamath explained in detail in answer to a question that what is the effect of STT on the market and trading capital. Explaining the whole issue, he said that if you add STT, GST and stamp duty, then only Zerodha customers pay around Rs 200 crore every month and Rs 2500 crore in a year only as transaction related taxes. After paying this much tax, the income which is earned, also has to be taxed separately. These include 10 per cent LTCG on capital gains above Rs 1 lakh, Short Term Capital Gains Tax (STCG) at the rate of 15 per cent and income taxable under the slab of income tax on intra-day and futures and options (F&O). Taxes are included.

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Investment will increase if transaction cost comes down: Kamath

Earlier, in an interview to ET Now, Kamath had said that if a retail investor has Rs 5 lakh in his account and trades in derivatives contracts with some leverage, the only STT burden on him is that After a day’s business, it becomes difficult to earn his profit. The co-founder of Zerodha says that if the cost of transactions in India is reduced, then this will motivate foreign investors to come to our country’s exchanges and do business and invest in our economy. This will increase the size of our market. He said that this is one such reform, which has been awaited for a long time.

Nitin Kamath says that the high cost of transactions is making a dent in the trading capital. If the impact cost is also included in this, then most of the active traders have to bear heavy losses. This loss is more than the loss caused by trading in the market. He said that if the STT is reduced, it will not only directly benefit the customers, but will also reduce the impact cost due to improved liquidity.


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