Regarding STT - Caluculation of Capital gain

It is clearly mention that STT on trading and trading includes both buy & sell

Also, credit for STT against business income tax will be allowed in cases where business profits are declared on delivery-based transactions.

Securities Transaction Tax (STT) was introduced in India a few years ago, to circumvent the tax avoidance of capital gains tax.

The government can only tax those profits, which have been declared by people. A lot of people simply didn’t declare their profits and avoided paying any capital gains tax.

To circumvent this situation, the Finance Minister at that time Mr. P Chidambaram introduced the Securities Transaction Tax. This tax is payable whether you buy or sell a share and gets added to the price during the transaction itself.

Since brokers have to automatically add this tax to the transaction price, there is no way to avoid it. If you place a limit order, then the broker will automatically adjust their brokerage and the Securities Transaction Tax and give you a price that matches your price. So, in a lot of cases; you will not even notice the tax that you paid. The flip side is that you end up paying this tax even if you have not made any gains at all.

At the end of the year, you can ask your broker to give you a certificate of the STT that you have paid through the year. You can use this amount to deduct from your short term capital gains and get a tax credit.

Thanx prakash for sharing a precious knowledge about short term capital gain as well as long term.

The income from share transaction can occur in following forms

1. Share trading

2. Speculative trade

3. F & O transactions

4. Capital Gains

Allowance of STT for First three types (1, 2 & 3)

From Assessment Year Asst Year 2009-10 (FY 2008-09 ) , Securities Transaction Tax (STT) is defined as an expense u/s 36(xv) of the I T Act

(xv) an amount equal to the securities transaction tax paid by the assessee in respect of the taxable securities transactions entered into in the course of his business during the previous year, if the income arising from such taxable securities transactions is included in the income computed under the head Profits and gains of business or profession.

Therefore , for share trading income, or speculative income, or Futures & Options trades , STT is an expense and deductible.

Can You Deduct STT from Capital Gains?

However , if you are selling the shares as investments , the STT can not be deducted as cost of acquisition . This is provided under the proviso to section 48 which is regarding cost of acquisition

Proviso to section 48

Provided also that no deduction shall be allowed in computing the income chargeable under the head Capital gains in respect of any sum paid on account of securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004

Thumb rule is that STT is cost for all kinds of transactions except capital gains.