Move to check tax evasion, announcement may come in Budget; OFS of PSUs may be reserved only for retail investors
The finance ministry is considering to abolish securities transaction tax (STT) on penny stocks in Union Budget 2017 as it seeks to put an end to tax evasion methods employed by investors and traders.
In the last two years, the income-tax department has unearthed tax evasion of Rs 45,000 crore via penny stocks after being alerted by the Securities and Exchange Board of India (Sebi).
Last Tuesday, the ministry had called a meeting of stock exchanges, fund managers, audit firms and primary market experts to discuss the issue and other measures for the capital market.
This meeting was chaired by finance minister Arun Jaitley along with the economic affairs secretary Shaktikanta Das. Sources who attended the meeting told DNA Money that the stock exchanges recommended removing STT on penny stocks so that traders in such stocks will not eligible for taking benefit of the long-term capital gain tax.
As of now, STT is Rs 20 on every Rs 1 crore worth of transaction in cash segment. STT is a tax payable by investors and traders to the central government, and therefore, is categorised as a regulatory charge.
Sebi, in its interim orders in 2014 and 2015, had suspended over 200 firms and barred close to 1,500 entities for using the stock exchange platform for evading taxes.
As per the I-T officials, “Sebi has done a massive crackdown on penny stocks and in the last two years. We have got information of tax evasion in the form of long-term capital gain in penny stocks. Even in income declaration scheme (IDS), a lot of declaration came by penny stocks holders and traders, especially in Mumbai. In Mumbai circle, the total declaration was around Rs 10,000 crore, primarily via penny stocks.”
The finance ministry is serious about taking hard steps on penny stocks. A source who attended the Tuesday meeting said, “In this meeting, penny stocks was major agenda and BSE was given this STT abolishing measure since that they have been hit by penny stocks and we can expect something in this Budget’.
J N Gupta, former executive director of Sebi, said, “Classification of penny stocks is a major issue. The government and Sebi should keep in mind the interests of minority shareholders who have invested in these companies.”
According to Sandeer Parekh, a corporate lawyer and former executive director, Sebi, crackdown on penny stock is a good move but how to pick penny stocks is an issue.
The government is also keen to increase retail participation in the offer for sale (OFS) of public sector companies. It wants to reserve OFS of public sector companies only for retail investors. “If retail investors are not able to subscribe them fully, then only it will be open to institutional investors,” said one official.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "securities transaction tax")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}