Vijay Kedia advocates for the abolition of the Securities Transaction Tax (STT) in India, claiming it has become an unnecessary burden on investors. He argues that reducing transaction costs could boost retail market participation and strengthen capital markets’ role in economic growth.
After urging the Indian government and Finance Minister Nirmala Sitharaman to abolish long-term capital gains (LTCG) tax and dividend tax, veteran investor Vijay Kedia believes another reform could further accelerate this growth story: abolishing the Securities Transaction Tax (STT).
In the third and final part of his suggestions to Finance Minister Nirmala Sitharaman and the Ministry of Finance for strengthening India’s capital markets, Kedia has called for a review of the continued relevance of STT, arguing that the levy has outlived its original purpose and now acts as an additional burden on investors.
STT was originally introduced as a simplified transaction tax aimed at making tax collection from capital market transactions easier and more efficient. Over time, however, Kedia believes the tax has evolved into an additional layer of taxation rather than a simplification measure.
“STT was introduced as a simplified transaction tax to facilitate easier collection of taxes from capital market transactions. However, over time, it has effectively become an additional layer of taxation alongside other market-related levies,” Kedia said in his post on X.
According to him, investors already bear a host of charges while participating in the stock market. These include brokerage fees, exchange transaction charges, GST on transaction-related charges, SEBI turnover fees, stamp duty, and STT itself.
Kedia argued that what was once intended to simplify taxation has effectively become a permanent duplication.
One of the key concerns highlighted by Kedia is that STT is payable regardless of whether an investor earns a profit or suffers a loss. Unlike income tax, which is linked to earnings, STT is charged merely for executing a transaction in the market.
“The investor pays STT irrespective of whether a trade generates profit or results in a loss. Unlike income tax, it is payable simply for participating in the market, making it a cost that cannot be avoided,” he noted.
This distinction is significant because transaction costs can directly affect investment returns, particularly for retail investors who may already be operating with limited capital. Even small costs, when accumulated over multiple transactions, can meaningfully reduce long-term wealth creation.
His proposal comes at a time when policymakers are increasingly focused on deepening retail participation in financial markets, improving capital formation, and encouraging long-term investment in productive assets.
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Kedia’s argument extends beyond tax simplification. He believes that reducing transaction costs could encourage broader participation in equity markets and strengthen the role of capital markets in supporting economic growth.
According to Kedia, India’s stock markets serve as an important channel through which household savings are directed towards businesses seeking capital for expansion. This process supports entrepreneurship, job creation, innovation, and overall economic development.
“Capital markets play a vital role in channeling household savings into productive enterprises, supporting entrepreneurship, generating employment and strengthening India’s economic growth. Multiple layers of taxation discourage participation, particularly among long-term retail investors,” Kedia said.
The veteran investor also pointed out that India’s equity markets have evolved significantly since STT was first introduced. With improved compliance systems, digitisation, advanced reporting mechanisms, and a much larger investor base, he believes the rationale that originally justified the levy deserves fresh examination.
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India today has one of the most sophisticated market infrastructures in the world, with seamless digital onboarding, real-time surveillance, automated tax reporting, and extensive regulatory oversight. In this changed environment, Kedia argues that policymakers should reassess whether STT remains necessary.
“India’s equity markets have matured significantly since the introduction of STT. The time has come to review its original purpose and reconsider its continued relevance. Abolishing STT would simplify market taxation, improve capital market efficiency and encourage greater participation in India’s growth story,” he said.
Kedia’s latest recommendation completes a series of suggestions aimed at making Indian capital markets more efficient and investor-friendly.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
