Bengaluru: Indian shares declined on Tuesday after the government proposed to raise the tax on capital gains and on trading derivatives, which analysts said could hit the markets in the short-term.
The NSE Nifty 50 and SP BSE Sensex dropped about 1.6 per cent each, as of 12:31 pm IST.
The Indian government raised the tax rate for equity investments held for less than one year to 20 per cent from 15 per cent and for shares held for more than 12 months to 12.5 per cent from 10 per cent, Finance Minister Nirmala Sitharaman said in her budget speech on Tuesday.
Sitharaman also raised the securities transaction tax on derivatives.
"The market was not anticipating negative surprises in areas like capital gains tax and securities transaction tax," said Krishna Appala, senior research analyst at CapitalMind Research.
($1 = 83.6350 Indian rupees)