In a year marked by a surge in investor participation in the stock market and record-breaking highs for benchmark indices, the Indian government has seen a significant increase in tax revenue from the Securities Transaction Tax (STT). According to Nitin Gupta, the chairman of the Central Board of Direct Taxes (CBDT), the Income Tax Department collected ₹25,000 crore in STT until the end of January. This amount reflects a substantial growth of 25% compared to the ₹20,000 crore collected during the same period the previous year.
The surge in STT collection aligns with the overall trend of robust growth seen in tax collections in the fiscal year. Personal income tax collection witnessed a 26% growth from April to January, while corporate tax collection experienced an 8% growth during the same period. The significant increase in STT revenue can be attributed to the buoyant activity in the capital market, where trade quantity jumped by 52% annually, and turnover saw a 40% growth from April to January.
The Indian stock market has been experiencing a bullish trend, with market capitalization crossing $4 trillion for the first time in December. This surge in market activity has been driven by various factors, including India’s status as the fastest-growing major economy, increased investments in infrastructure, and efforts to position the country as an alternative to China in the global supply chain.
STT is levied on transactions involving the purchase and sale of listed securities in India. The tax rate varies depending on the instrument, ranging from 0.001% to 0.2%. STT serves as a tax collected at source, providing the government with crucial information about market transactions.
The increase in STT collections reflects heightened trading activity, not only by foreign portfolio investors but also by domestic institutional and retail investors. This surge in participation can be attributed to factors such as increased investor confidence, improved market sentiment, and the ease of access to financial markets through digital platforms.
In addition to STT collections, the Income Tax Department also collected ₹1,080 crore as tax deducted at source (TDS) from online game winnings during the April to January period. The online gaming sector, which witnessed a surge in popularity during the pandemic-induced lockdowns, has been experiencing rapid growth. With 425 million gamers, India has the second-largest gaming population globally, after China.
The significant tax revenue from online game winnings underscores the growing economic significance of the gaming industry in India. Industry estimates suggest that the sector is poised to reach ₹33,243 crore in fiscal year 2028, with a compound annual growth rate (CAGR) of 15%. The gaming industry has the potential to attract foreign direct investment, create employment opportunities, and drive investments across various sectors.
The current fiscal year has seen significant tax changes in the online gaming industry, including the removal of the threshold for TDS on winnings and the introduction of a 28% Goods and Services Tax (GST) on bets. These measures aim to streamline tax compliance and ensure that winnings from online gaming are subject to appropriate taxation.
Looking ahead, the government remains focused on expanding the tax base and enhancing tax compliance through digitization and taxpayer-centric policies. The increasing trend of tax return filings and the widening adoption of digital platforms for tax-related transactions are expected to contribute to the long-term goal of broadening the tax base and enhancing revenue collection.
Overall, the surge in STT collections and tax revenue from online gaming winnings reflects the vibrancy of India’s capital market and the growing economic significance of the gaming industry. As the country continues its journey towards economic recovery and growth, tax reforms and digitization efforts will play a crucial role in sustaining momentum and fostering inclusive development.