New Duty On Demat Shares May Make It Cheaper To Invest

The stock market is one of the most popular and rapidly growing investment avenues. A growing number of individuals are investing their savings in the stock market for the long term with the aim to generate higher returns. What makes the stock market the best avenue to invest money is its ability to create a huge wealth in the long run.

In order, to attract more people towards the equities market, the government has proposed to bring in a single stamp duty rate on financial transactions. In this article, we will learn about this new duty on the demat shares which will make it cheaper to invest.

The government of India has proposed a single stamp duty rate for all the financial transactions. The collection of this duty will be done at the stock exchange and it is expected to attract higher investment. Levying stamp duty on one instrument relating to one transaction of the financial securities will lead to higher investment by people in the equity markets. It will also improve the level of ease of doing business.

The aim of streamlining the process of duty collection is to reduce tax evasion. Earlier, stamp duties use to vary in different states and many discrepancies were there at the time of collection of tax. Now the duty shall be collected in a uniform manner at the stock exchanges. Till now, investment in the form of physical shares attracted the stamp duty and demat shares were exempt.

With the proposal of collecting the tax at a single place i.e. the stock exchange, the proceeds of tax collection shall be shared with the states on the basis of the domicile of the buyer. This would bring down the cascading effect of the duty collection and compliance would be easily possible.

The proposal introduced by Finance Minister, Piyush Goyal in the Finance Bill 2019-20 after presentation of the Interim Budget fulfils the demand of the broking industry for a single stamp duty rate. It will help the brokers avoid litigations and reduce procedural hassles. Furthermore, the single stamp duty rate shall have no effect on the Securities Transaction Tax (STT) because it is levied on transaction value excluding the stamp duty.

Since the new duty on demat shares would make it cheaper to invest in equities, you may consider opening a demat account. And, if you are wondering where to open your demat account, Kotak Securities is the number one choice of investors. They have the lowest demat account charges and offer unmatched hassle-free services.

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