capital gain

Securities Transaction Tax (STT)

STT is a tax payable in India on the value of securities (excluding commodities and currency)

transacted through a recognized stock exchange. As of 2016, it is 0.1% for delivery based equity trading.

 The tax is not applicable on off-market transactions or on commodity or currency transactions. The original tax rate was set at 0.125% for a delivery-based equity transaction and 0.025% on an intra-day transaction.

The rate was set at 0.017% on all Futures and Options transactions. STT was originally introduced in 2004 by the then Finance Minister, P. Chidambaram to stop tax avoidance of capital gains tax. The government reduced this tax in the 2013 budget after a lot of protests for years by the brokers and the trading community.

The revised STT for delivery-based equity trading is 0.1% on the turnover. For Futures, the tax has been reduced to 0.01% on the sell-side only.

Where the assessee is either Salaried or is engaged in some other business or profession and trading in securities is not the main line of business. In such cases gains or losses from securities transactions are taxed under the head “Income from Capital Gains”.

 Gains or losses are subject to Short Term Capital Gains (STCG) or Long Term Capital Gains (LTCG) tax depending upon the period of holding, i.e., if the holding period is less than 1 year, gains are classified as STCG and if the holding period is equal to or greater than 1 year, gains are classified as LTCG.

Any equity share, which has been sold through a recognised stock exchange and on which STT has been paid, is entitled to exemption from LTCG under Section 10 (38) of the Act. Similarly, in case of STCG of such shares, the gains shall be taxed only at 15%, plus surcharge and education cess under section 111A of the Act.