Uniform stamp duty for all states from Jan 9th, 2020

In continuation of the budget announcement, here is the link to the notification from the Ministry of Finance.

Below are the rates that everyone will have to pay going forward:

Type of trade New stamp duty rate
Delivery equity trades 0.015% or Rs 1500 per crore on buy-side
Intraday equity trades 0.003% or Rs 300 per crore on buy-side
Futures (equity and commodity) 0.002% or Rs 200 per crore on buy-side
Options (equity and commodity) 0.003% or Rs 300 per crore on buy-side
Currency 0.0001% or Rs 10 per crore on buy-side

As per the finance bill, The stamp duty is only on the buy-side of the transaction so, in essence, the actual rate would be just 50% of the above rates. Currently, it is charged on both buy and sell.

Good news

  • One rate for all makes it a level playing field.
  • The rates are generally lower for most states - by almost 50% (except states which had a maximum cap per day). So lesser transaction cost for active traders.
  • Brokers had to earlier worry about collecting and paying to all the states, exchanges will do it now. A lesser operational burden on brokerage firms.

Bad news

  • Over 50% of trading volumes on exchanges are contributed by HFT firms/Prop shops who are themselves members on the exchange. There was no stamp duty on prop trading as a broker who trades for himself doesn’t have to generate a contract note. First reading, it seems like all of them will also have to start paying stamp duty.
    Most of them run arbitrage strategies which generate large volumes with very thin margins. This stamp duty cost will definitely increase the transaction cost significantly and can potentially bring down the trading volumes on the exchange. Lower trading volumes mean higher impact cost for everyone else. The broking community will surely make a representation to get this clarified from the Govt, ideally, there should be no stamp duty on such trades that are executed for your own self.

You can check this google doc with current stamp duty to see how the new rates affect you.

I guess the ones who will get adversely affected are active traders based out of states where there was a maximum cap on the stamp duty per day, like Haryana, Andhra Pradesh, etc. The ones who will benefit are clients from states like Tamil Nadu, Goa, etc where it was higher than the new rates. It remains nearly unchanged for most other states. Currency traders from states where there was no maximum cap per day earlier, will be the biggest beneficiaries - a reduction from Rs 200/crore to just Rs 10/crore in states like Maharashtra, Delhi, etc.

But yeah, this levels out the playing field in terms of costs for all traders in the country.

Brokerage firms like us will have one less thing to worry of collecting and depositing stamp duty to all the states every month as like in STT, the exchange will collect it from the brokerage firm and deposit it with the Govt. :slight_smile:

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@nithin

As per my understanding, the duty is applicable only on the buy side for all kind of trades, not just delivery trade.

The amendment to the stamp act is clear that “securities” include “derivatives” and also the duty is to be collected from the buyer. Please check page 10 & 11 of finance act 2019(1).

Am I missing something?

Thanks

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@nithin

You also said the same in the original thread that the duty is only on the buy side.

Please clarify.

Thanks

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Yes, I think I’ve read something similar. @nithin, can you please confirm?

The amendments to stamp act is clear on two things.

  1. Securities include derivatives.
  2. Duty is on the buy side only.

@nithin or @VenuMadhav can give us some explanations why only equity delivery is charged on buy side but not others.

Ah, let me confirm this.

My bad, have corrected the above post. It is buy side for all. So yeah you are right.

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Great. I was afraid I missed something. Charging only one side means we pay way less going forward. Uniform duty across the nation is indeed a welcome move.

I request Zerodha to explain the charges for mutual funds (in demat), ETFs and when we gift/transfer shares from one demat account to other.

Thanks,

There is nothing for MF in demat. ETF’s are treated like stocks, so as above.

When we gift/transfer, stamp as per delivery trade is going to apply.

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@nithin , in the case of future contracts, it is only an Agreement to Buy / Sell. So why is stamp duty chargeable on futures? Shouldn’t stamp duty be charged only if actual Purchase / Sale happens i.e. only if delivery is taken on these contracts?

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Yeah exactly the point. :slight_smile:

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Update: The Government has revised the date of implementation of the uniform stamp duty from January 09 to April 01,2020. Here’s the notification of the same: https://www1.nseindia.com/content/circulars/CMPT43164.zip

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Can you request your team to update the new rates applicable on the Zerodha Brokerage Calculator. It isn’t modified yet. @siva

The implementation is pushed to April 01,2020. Please see the above post.

Is the implementation of uniform stamp duty on track for April 01, 2020? @nithin / @VenuMadhav please confirm.

Yes, it is on track.

*** New circular came later part of the day, it is deferred as mentioned below by Venu.

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It has been deferred to July 01, 2020, here’s the link

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For how long they will push this. This is sad indeed

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