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Evolution of security transaction tax in India

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  • Sinha, Pankaj
  • Mathur, Kritika

Abstract

Securities Transaction Taxes have received much attention over the last few years with countries and global organizations trying to control the level of speculations, especially since the Global Financial Crisis. This study examines the impact of an increase in the level of securities transaction tax on traded quantity of shares and time series behaviour of stock returns using data from two prominent national stock exchanges of India. We find that when the tax on equity transactions increases from 0.1% to 0.125%, the quantity of traded shares (volume) decreases by more than twenty five percent. Since the volatility of returns on stocks is not constant through time, conditional heteroscedasticity models are used to estimate the volatility of stock returns. The impact of tax on volatility of return on indices is insignificant.

Suggested Citation

  • Sinha, Pankaj & Mathur, Kritika, 2012. "Evolution of security transaction tax in India," MPRA Paper 40165, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:40165
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    References listed on IDEAS

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    Cited by:

    1. Sinha, Pankaj & Mathur, Kritika, 2012. "Securities transaction tax and the stock market– an Indian experience," MPRA Paper 42743, University Library of Munich, Germany.
    2. Sinha, Pankaj & Mathur, Kritika, 2015. "Impact of Commodities Transaction Tax on Indian Commodity Futures," MPRA Paper 63677, University Library of Munich, Germany.

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    More about this item

    Keywords

    securities transaction taxes; stock market; returns; traded shares;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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