Stock brokers on Tuesday urged the government to exempt day traders from the ambit of the proposed transaction tax. They said the imposition of the new tax would amount to double taxation of their business income.

"The proposal is a welcome step for long-term investors, who are paying capital gains tax. But for day traders, there are no capital gains and they instead earn only a business income," a leading broker said after a meeting with Finance Minister P Chidambaram.

The brokers had sought a meeting with the finance minister to present their case for a relook at the transaction tax of 0.15 per cent on the purchase of all listed shares and bonds proposed in the Budget.

Sections of the community also observed a day's token strike at the bourses to press for their demands.

Apart from Chidambaram and senior ministry officials, Sebi Chairman GN Bajpai attended the meeting. Bajpai met the finance minister in the morning and briefed him about the securities market and the concerns of broking community over the new tax.

Coming out of the evening meeting, Bajpai said he merely acted as an interface between the finance minister and the brokers. "It was a pretty long meeting. I have just conveyed the feedback and suggestions of market players to the finance minister," he said.

Former Bombay Stock Exchange president Deena Mehta said the tax should be linked to the profile of investors. "In the case of the bond market, trading is on thin margins and it is not profitable for us," she told reporters after the meeting.

She added that the brokers had neither demanded a rollback of the Budget proposal nor suggested a lower rate of taxation. She also said the brokers had not presented an alternate tax mechanism. The government, however, did not disclose the options before it.

Mehta said there could be some revenue leakage in the present system, but tools were available to plug it.

"The market is not made up of only long-term investors. It has many faces and, therefore, cannot have a uniform tax rate," said VVK Prasad, alternate president the Association of NSE Members of India.

A section of brokers has sought a differential rate of tax on delivery and non-delivery transactions. A majority of bond dealers want the finance minister to exempt transactions in government securities and other corporate bonds from the new tax considering the low margins.

In a presentation, brokers said the proposed tax would result in a sharp decline in the volume of trade in the securities and debt markets and the government would be able to raise only Rs 1,035 crore (Rs 10.35 billion) against the Budget target of Rs 3,500 crore (Rs 35 billion).