This is extremely concerning news. I hope it’s mere speculation from a portal to get views.
But if not, it’s a disastrous idea for Indian markets. RBI destroyed flourishing USDINR market with just one circular. Something similar could happen here with this jolt.
The biggest issue if I’m reading this right is TDS like cryptos? When we make money we get it with tds deducted next day. When we lose, we lose full. Worse, will they implement it contract wise. Then on a day if I lost money overall, I may still have to pay tds on the contract in which I made some money. That’s horrible.
Secondly, flat 30% tax like lotteries. Just one bad idea after another.
@nithin if you have any influence over this, please talk some sense into them. Make them understand that hedging is not possible without opposite parties ready to take the bet. About equity trades - as a layman, I used to think why should market have intraday orders, why shouldn’t buyers and sellers who want to buy instantly be paired and that’s it. Then I realized how liquidity works and how it improves the situation for everybody.(This post is regarding FnO changes. I used the equity example just to clear how I used to think.)
I hope our ministers and senior officials are not making decisions while thinking like a layman. They can’t simply ban one side of the bet and expect that markets will keep functioning as usual. It will have wide implications.
After reading a few articles on this news buzz, there are 3 major changes being discussed:
Moving from non-speculative to speculative business head:
As we already know that 90% loose money let’s understand impact on the 10%. Most of these 10% peeps would have income from non-trading activities upto/exceeding the top tax bracket (10 lakhs under old regime and 15 lakhs under new) of 30%, so this change would not make any difference for them and claiming of expenses can continue no matter to which business head f&o trading is moved
Higher STT for HFT’s with +1000 cr turnover:
I read this would reduce this instance of sudden injections/spikes, but I don’t think HFTs will be discouraged, instead I suppose this should increase the coordination among HFT folks and ultimately make the spikes ‘spikier’ so as to cover the higher fixed cost in terms of increased STT. Whatever the case, this will most likely increase the bid-ask spreads as HFTs are major liquidity providers
Introduction of Crypto like TDS on F&O transactions:
If this happens, I don’t think HFTs and other market makers can exist anymore. They do 10s and 100s of transactions turning over the same capital they have and imagine TDS of 1% on every sell side of a trade irrespective whether you profit or loose. Now assuming they turnover their capital 10 times a day and also assuming option writing needs about 12-15x more capital vs option buying, them being primarily option writers their capital existing would all be used up in 120-150 trading days just to pay TDS. Either they have to bring in fresh capital in bulk or reduce their capital turnover (which would again add to higher bid-ask spreads) or worst case go out of business. I don’t see crypto like TDS being imposed.
Intraday equity is also categorized as speculative income. It is taxed on slabs.
Difference i think is that losses from speculative business income cannot be adjusted against other heads. So if i had losses in equity intraday i could not adjust it against FnO profits. If this change happens, i will be able to do that but i probably will not be able to adjust fno losses against other stuff.
If F&O is moved to Speculative Business head without any caveats, then intraday equity losses could be setoff against F&O gains and vice-versa. But the change comes with caveats, like in the case of crypto where in you cannot setoff loss from one crypto cannot be setoff against another then I don’t think intraday equity and F&O setoff will be allowed
Some influencer online was saying that 30% TDS will be cut.
he was explaining that if you deposit 1000 rupees 300 rupees will be cut and you will have only 700 rupees to trade. That doen’t even make sense.
I am assuing that TDS will be profit if you deposit 10000 and you make 1000 profit TDS of 1/5/10 percent will be cut from 1000 rupees based on what precentage they choose.
Please correct me if I am wrong or confirm the above.
Thanks.
TCS (Tax Collected at source) on LRS is upfront tax collected. This is NOT some additional tax liability, just advance-tax collected upfront. The tax collected upfront (TCS) is available as tax-credit that the individual is expected to use to offset actual taxes due (eg. during quarterly tax payment, or at the end of the year when filing ITR).
I know I was right, you must have heard the quote “The problem with the world is the intelligent and full of doubt and the dumb and cocksure”
I was like how can such a reputed Influencer who is not like those one who have not hit puberty yet and giving finanical advice but a middle aged experienced trader who became famous because he debunked many myths on stocks etc can put his reputation at risk and say something so absurd. So I thought let me confirm with someone else even though I know its common sense TDS is collected in advance on money earned not deposited.
Thanks for confirmation.
Whether its on earning or earlier, tds/tcs if it happens will likely kill the market and make trading/market making impractical.
We get series of profits and losses to get the pnl of the year, any individual trade result is meaningless.
Highly doubt that they will do this, they will lose tax income, but anything is possible i guess after looking at USDINR.
I will definitely stop trading futures if this happens.
Futures income being labelled as speculative business income looks more likely as that will prevent fno losses from being adjusted against potential tax income from other heads. And probably STT increase again because they cant help themselves …
A 1% TDS on futures sales value.
If i sell nifty futures at 23500 (100qty) does it mean i will have to pay 1% of 2350000 i.e. 23500. That seems idiotic. It will make the entire derivative section untradable not only for retail but for foreign investors as well.
They propose to introduce daily expiration and increase taxes on futures and options to protect retail investors, but they will not eliminate the concept of daily expiration
