Budget 2024: Zerodha CEO Nithin Kamath expressed his opinions about the changes as Finance Minister Nirmala Sitharaman announced union budget 2024 under Modi 3.0 administration. Kamath outlined a few significant points that retail traders should be aware of.
Nithin Kamath on Budget 2024
Rising Costs to Trade
One of Kamath’s key points was the hike in Securities Transaction Tax (STT). This tax essentially adds a fee to buying and selling stocks and options. Here’s the breakdown:
- Options trading: STT goes up from 0.062% to 0.1%, meaning you’ll pay a bigger chunk on each options trade starting October 1st.
- Futures trading: The STT on futures goes from 0.0125% to 0.02%, another increase for transactions starting in October.
According to Nithin Kamath, these modifications may have a major effect on trading volume. Based to his estimation, if trading activity remains unchanged, Zerodha alone would witness an increase in its STT revenue from Rs 1500 crore to Rs 2500 crore. This could result in increased trading expenses for retail traders.
Capital Gains Tax Gets a Bump Up
The capital gains tax, which is the tax you pay on the earnings you make from selling stocks or shares, was also revised in Budget 2024. Check what’s new is this:
- Long-term capital gains: The tax on profits from holding stocks for more than a year has increased from 10% to 12.5%.
- Short-term capital gains: Profits from selling stocks within a year will now be taxed at 20%, up from the previous rate of 15%.
Some investors might be reluctant to sell their assets as a result, particularly if they expect quick profits. These adjustments may have the intention of “cooling down activity” in the markets, as Kamath indicates.
Market Reactions and Implications
There was a big sell-off in the stock market as the budget was announced. The market was disappointed because of the hikes in both the short- and long-term capital gains taxes, as well as the increased STT on F&O.
The Sensex initially opened higher before the Budget 2024-25 speech but began to decline as the speech progressed. During the Budget presentation, the Sensex plunged by nearly 850 points before slightly recovering. By 1:26 PM on Tuesday, the Sensex was down 654.79 points, trading at 79,847.29, while the Nifty dropped 185.6 points, falling below the 24,350 mark to 24,325 points.
What This Means for Retail Traders
The rise in capital gains and STT taxes will probably have a big impact on retail trading. Reduced trading volumes and a disincentive to engage in short-term trading could result from higher transaction costs and taxes. Retail traders may need to review their approach and think about how these adjustments may affect their portfolios in the long run.
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