Terming the introduction of transaction tax as a part of rationalisation of tax system, the government on Thursday said the new tax would mop up around Rs 4,000 crore to Rs 5000 crore (Rs 40 billion to Rs 50 billion) during the remaining months of the current fiscal year.

Senior finance ministry officials told reporters during the customary post-Budget press conference that the transaction tax replacing the long-term capital gains tax would make it mandatory for everybody who trades in the stock market or the security market to pay the tax.

The new tax system, under which the tax would be payable on the delivery day and not merely on a day-to-day basis, will be levied on the buyer.

Terming it as a win-win situation, Revenue Secretary Vineeta Rai said the transaction tax, also commonly called the turnover tax, would be made applicable on shares, debts and securities among others.

Turnover tax imposition might ease volumes: brokers

The stockbroker fraternity today reacted sharply to the announcement of turnover tax on equity transactions, fearing it would drive down the business volumes by more than half and squeeze the equity prices further.

"It is an adverse Budget for the capital markets as the finance minister proposed a huge turnover tax on equity transactions," said a Delhi and Mumbai Stock Exchange member broker Rajiv Malik.

The tax imposed was well above the market expectations and would squeeze the trading volumes by more than half in future, he said and added that the brokers were of the view that it might be around 0.05 per cent.

Manoj Choraria, a leading BSE and NSE broker, apprehended a serious fallout of the imposition of 0.15 per cent trading tax, saying it would deter investors from the market. The daily trading volume could fall from an average Rs 12,000 crore (Rs 120 billion) to Rs 3,000 crore (Rs 30 billion), he said.

Meanwhile, a group of retail investors demonstrated outside the Bombay Stock Exchange today, protesting against the finance minister's announcement introducing the turnover tax.

The investors, who raised slogans against the finance minister, alleged that any such tax would lead to lowering of volumes and drying up liquidity in the markets which was already bearish for quite some time.

However, they seemed to be pacified after a clarification was issued in Delhi by the government that the tax would be levied on delivery of shares in which a small section of investors operate.