Mumbai: The tax on transactions in the share market could be done away with in this budget.
It's part of a series of capital market reforms the Finance Ministry is considering.
If the Securities Transaction Tax (STT) is removed, India will be one of the cheapest markets in the world for stock transactions and will attract more foreign institutional investors.
The STT accounts for nearly half the total tax paid by traders in the capital markets.
It is applicable on all stock market transactions.
The tax has been criticised for being flawed in design and creating distortions. Sources say the Finance Ministry is aware of this.
But because the government needs money it may remove the STT and replace it with another, alternative tax.
Former Finance Minister P Chidambaram was against any proposal to do away with STT.
But the new Finance Minister Pranab Mukherjee has not shown aversion to change on the issue.