Securities Transaction Tax
What is a securities transaction tax?
It is common for taxpayers to seek tax evading measures by not declaring their profits on the sale of stocks, so the government came up with a measure and introduced a securities transaction tax (STT) in order to make tax collection from financial market transactions efficient and clean. This is a tax levied on the value of transactions in listed equity shares, derivatives and equity mutual fund units. It was introduced in the 2004 Union budget and came into effect on October 1, 2004.
STT is similar to tax collected at source or tax deducted at source and is directly collected at the time you purchase and sell a security on the stock exchange. It is imposed on the value of the transaction in listed equity shares, derivatives and equity mutual funds, so it would differ depending on the type of security you trade for both purchase and sale.
No STT is payable on a transaction in debt securities/ units of debt mutual funds. The STT is applicable to all sell transaction for both futures and options contracts. If you are buying equity mutual funds you do not pay the STT but when selling it you’d pay a securities transaction rate of 0.001 percent of the unit value. Now if you are buying or selling an equity share you need to pay 0.1 percent of the share value as STT or securities transaction tax. The rates on securities transaction tax are decided and imposed by the central government.Securities transacted on a Recognised Stock Exchange in India are subject to STT levied as follows:
|Purchase and sale of equity shares on the stock exchange>||0.100%||Purchaser/Seller|
|Sale/redemption of units of equity oriented mutual fund||0.001%||Seller|
|Sale of an option in security on the stock exchange||0.050%||Seller|
|Sale of an option in security where the option is exercised on the exchange||0.125||Purchaser|
|Sale of a future in securities on the stock exchange||0.010%||Seller|