Stock Market Transformations Effective October 1: The Indian financial landscape is poised for substantial changes starting October 1. Major updates will affect trading practices on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Notably, the introduction of new transaction fees for brokers in various segments is expected to reshape the trading environment. Additionally, the government has revised the taxation framework for share buybacks, now treating them as dividends, and has introduced a hike in the securities transaction tax (STT) on Futures & Options (F&O) trading. Furthermore, the Securities and Exchange Board of India (SEBI) has streamlined the trading process for bonus shares, implementing a new T+2 settlement cycle.
Unified Transaction Fees for Brokers
Both NSE and BSE have announced updated transaction fee structures applicable to cash and derivatives segments, effective starting October 1. Here’s a breakdown of the new fees:
| Segment | NSE Fee (₹ per lakh) | BSE Fee (₹ per crore) |
|---|---|---|
| Cash Market | ₹ 2.97 | – |
| Equity Futures | ₹ 1.73 | – |
| Equity Options | ₹ 35.03 | – |
| Sensex & Bankex Options | – | ₹ 3,250 |
The rise in transaction fees follows a SEBI circular released in July 2024, detailing new fee structures designed for Market Infrastructure Institutions (MIIs).
Revised Taxation on Share Buybacks
Finance Minister Nirmala Sitharaman announced a pivotal shift in the tax treatment of share buybacks, effective October 1. Under the new regulations, income derived from share buybacks will be classified as dividends, thereby shifting the tax burden from corporations to individual shareholders. This means that shareholders will be taxed based on their personal income tax rates, marking a significant change in how shareholder returns are assessed.
Previously, companies utilized share buybacks as a tax-efficient method to distribute profits to investors. This adjustment not only changes the taxation framework but may also influence corporate strategies regarding capital return to shareholders.
Increased STT on Derivatives Trading
As part of the ongoing effort to rationalize the trading ecosystem, the securities transaction tax (STT) on Futures & Options (F&O) trading has seen a notable increase, as per the announcement made earlier in the year by the Finance Minister. The updated STT rates effective October 1 are:
| Trade Type | Old STT Rate | New STT Rate |
|---|---|---|
| Futures Trading | 0.0125% | 0.02% |
| Options Trading | 0.05% | 0.1% |
This hike in STT aims to manage the growing retail activity in derivatives trading, which has seen a significant surge in recent times. By increasing the costs associated with derivatives trading, the government hopes to temper speculative trading while ensuring a more stable trading environment.
New T+2 Framework for Bonus Share Trading
In a bid to enhance operational efficiency and speed up trading processes, SEBI has introduced a revision to the bonus share trading timeline. Starting October 1, shares issued under bonus schemes will be available for trading just two days after the record date under the new T+2 framework. This reform is expected to improve liquidity and streamline the trading experience for investors, enabling quicker access to their bonus shares.
