FM hikes tax on derivatives trade five times to 0.1%

AS feared by the markets, finance minister Nirmala Sitharaman has proposed to raise the tax rate on derivatives trade in the budget five times from 0.02% to 0.1%, spooking the market pulling it down by over 1.5% intra-day and sending the rupee, which has been plumbing new lows to a new record low of 83.69 to the dollar, inching past the previous lifetime low of 83.67.

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With the economic survey also after Sebi and RBI bosses raising concerns multiple times in recent months calling for belling the derivatives cat in strong words it was clear that some disincentives could come in the budget, presented Tuesday. While the Sebi concern is on the increasing futures and options play by retail investors who are losing more than they are making from the such investments, the RBI worries are more about the speculative nature of this segment and the resultant possible spillover effects on the financial system.