BackGovt’s earnings surge: ₹25,000 cr from STT as stock market hits highs
The Income Tax Department collected ₹25,000 crore in securities transaction tax (STT) till end of January, compared to ₹20,000 crore collected in the same time a year ago
PremiumNew Delhi: In a year investors flooded into the stock market and the benchmark indices touched new highs, the government earned 25% more from the tax on selling listed securities, a top official said.
The Income Tax Department collected ₹25,000 crore in securities transaction tax (STT) till end of January, compared to ₹20,000 crore collected in the same time a year ago, Central Board of Direct Taxes (CBDT) chairman Nitin Gupta said in an interview.
The growth is in line with the 26% growth seen in personal income tax collection in the April to 10 January period this fiscal, but way above the 8% growth in corporate tax collection. The growth in STT collection reflects the robust growth in capital market trade quantity and turnover. The buoyancy in equity market comes at a time India’s economy steadfastly remains the fastest growing among major economy, and the government is scaling up investments in infrastructure to record levels while positioning itself as an alternative to China in the global supply chain. India’s stock market capitalization first crossed $4 trillion for the first time on 5 December.
As per data available from the National Stock Exchange (NSE), capital market trade quantity jumped 52% annually in the April to January period, while turnover saw a 40% growth at the same time. STT rate varies from 0.001% to 0.2% depending on the instrument, with the highest rate applicable in the case of shares getting listed as part of an initial offer.
STT works like a tax collected at source, which gives the government information about the transactions in the market.
The increase in STT collections is not surprising because market activity has been quite buoyant, said Rajesh Gandhi, partner, Deloitte India. “So, while the foreign portfolio investor numbers have been reasonably stronger except for the later part of the year, trading by domestic institutional and retail investors, whether direct investments or through portfolio management services, alternative investment funds and mutual funds, has increased significantly," said Gandhi.
The I-T department also collected ₹1,080 crore as tax deducted at source (TDS) from online game winnings of people in the 1 April to 31 January period, Gupta said.
This suggests that the total income people made from online game winnings was around ₹3,600 crore so far this year up to end of January, given that the TDS rate is as high as 30% on online game winnings. The sector, which received a boost during the pandemic-induced lockdown, has clocked a compounded annual growth rate of 28% over three years to reach ₹16,428 crore in FY23, EY said in a report in December. India has 425 million gamers, the second largest globally after China, the EY report said.
Industry estimates suggest this sector will grow to ₹33,243 crore in FY28, showing a 15% CAGR, the report said, adding it holds the potential to boost foreign direct investment inflows, employment, and investments in various areas.
In the current financial year, online gaming industry witnessed significant tax changes. In the FY24 Union budget presented last February, the government removed the threshold of ₹10,000 for TDS on winnings, making most of the withdrawals of winnings immediately subject to tax deducted at source with some extra time for those below ₹100. Later, the GST Council introduced a 28% GST on the bets from 1 October.
In response to a question on whether the government is looking at expanding TCS and TDS provisions, Gupta said, “a vast array of transactions are already in the TDS/TCS net." Gupta also said that if the tax return filings keep improving over the next few years at its current pace, it will help in widening the tax base in a substantial manner. The CBDT had on 1 January said that a record 81.8 million tax returns were filed for assessment year 2023-24 up to end of December, a 9% jump over the returns filed in the same time a year ago.
“More and more digitization and more and more taxpayer centric policies would help in the long run (in widening the tax base) as we have seen in the past," said Gupta.
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