Commodities Transaction Tax (CTT)
- Proposed in Finance Bill, 2013 for enhancing financial resources.
- A tax which shall be levied on non-agricultural commodities futures
contracts at the same rate as on equity futures that is at 0.01% of the
price of the trade.
- CTT would tax trading of non-farm commodities like gold, silver and
non-ferrous metals such as copper and energy products like crude oil and
natural gas in India.
- Here both parties—buyer & seller of contract—will be taxed depending on the amount of contract size.
- Similar to the Securities Transaction Tax (STT) levied on the purchase and sale of equities in the stock market.
- So far, commodity transactions have been exempted from any levy.
- Agricultural commodities have been left out of CTT.
What are the Advantages of levying CTT?
- It will open up new resources for the augmentation of government finances.
- CTT would generate revenues of around Rs.45 billion to government.
- It is also aimed at bringing transparency in the commodity exchange market.
What could be the disadvantages of CTT?
- CTT has been opposed by the experts and the PMEAC had also suggested against levying such a tax.
- CTT will increase the transaction cost because traders already pay
brokerage, deposit margin, brokerage, stamp duty and transaction
charges.
The Budget 2013-14 has proposed to introduce Inflation-Indexed Bonds
or IIBs with the aim to control rising Current Account Deficit, fiscal
deficit and inflation. The move by the government has been lauded by the
RBI saying that the step is in line with government’s commitment to
lowering inflation.
What are IIBs?
Inflation-Indexed Bonds or IIBs are are bonds where
the principal is indexed to inflation. They are thus designed to cut out
the inflation risk of an investment. These bonds will be linked to the inflation index of the country (Wholesale Price Index or WPI)
and serve as a better investment option as compared to physical assets
like real estate and gold. Higher the inflation, higher the returns.
How would IIBs help?
As per RBI, IIBs would help in:
- Boosting domestic savings and reversing the declining savings-to-GDP ratio.
- Providing households and other investors a competitive option against gold and real estate. In
the wake of rising inflation last year, there was considerable flow of
investments from financial savings to safe-haven assets like gold that
resulted into higher imports of the metal. This led to current account
deficit or CAD widening to 4.9% of GDP at the end of September 2012.
- Giving investors choice to use IIBs as good hedging instruments against inflation.
- Tax benefits for investing up to Rs 50,000 in the capital markets for first-time retail investors with an annual income of Rs 10 lakh.
- The scheme initially announced in Budget 2012 had allowed tax benefits for investments in stocks. Later, Exchange Traded Funds (ETFs) and MFs were included under its ambit.
- Open to retail investors who have opened demat accounts but have not made any transactions in equity or derivatives till the notification of the scheme.
- Open to retail investors who have opened demat accounts but have not made any transactions in equity or derivatives till the notification of the scheme.
- All those opening fresh accounts would also be eligible to participate in RGESS.
- Investments can be made in various installments during a year.
- Total lock-in period: 3 years,including an initial lock-in of one year in the stock/ETF/MF in which the money has been invested.
- Stocks listed under BSE 100 or CNX 100 or those of PSUs which are Navratnas, Maharatnas and Miniratnas would be eligible.
- Investment in follow-on offers of these companies would also be eligible for tax deduction.
