As per the existing provisions section 99 of the Finance (No.2) Act, 2004, the value of taxable securities transaction in respect of sale of an option in securities, where option is exercised, shall be, the settlement price.

In order to rationalise the levy of STT where the option is exercised, it is proposed to amend the said section so as to provide that value of taxable securities transaction in respect of sale of an option in securities, where option is exercised, shall be the difference between the strike price and the settlement price.

This amendment will take effect from 1st September, 2019.

[Clause 193]

Extract of Clause 193 of Finance Bill 2019

193. Amendment of Act 23 of 2004.

In section 99 of the Finance (No. 2) Act, 2004, with effect from the 1st day of September, 2019,––

(I) in clause (a), in sub-clause (ii), for the words “settlement price”, the words “intrinsic value” shall be substituted;

(II) after the proviso, the following Explanation shall be inserted, namely:––

Explanation.–– For the purposes of this section, the expression “intrinsic value” means the difference between the settlement price and the strike price.’.

Note on Clause 193 of Finance Bill 2019

Clause 193 of the Bill seeks to amend section 99 of the Finance (No. 2) Act, 2004 relating to the value of taxable securities transaction.

The said section provides for the value of taxable securities transaction in respect of sale of an option in securities, where option is exercised, shall be the settlement price.

It is proposed to amend the said section so as to provide that the value of taxable securities transaction in respect of sale of an option in securities, where option is exercised shall be the intrinsic value.

It is further proposed to insert an Explanation in the said section so as to define the expression “intrinsic value” for the purposes of the said section.

These amendments will take effect from 1st September, 2019.

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