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Security transaction tax

Nikhil Darji (16 Points)

11 December 2019

can we "STT of purchase" deduct on sale value of share, computation of LTCG..??

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5 Replies

sanjith kotni (Articled assistant) (663 Points)
Replied 12 December 2019

No if you are doing share trading business then it will be allowed as expense but under capital gains head it will not be allowed

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Shivam RC (Student) (23683 Points)
Replied 14 December 2019

No you cannot deduct Securities Transaction Tax ( STT ) while computing LTCG.

2 Like

Kapadia Pravin (17249 Points)
Replied 15 December 2019

Yes surely
why not ?
Contract value itself is after deduction of all incidental charges, brokerage, GST, STT, Txn charges etc.

For capital gain purposes , you can definitely take STT deduction.

Shivam RC (Student) (23683 Points)
Replied 15 December 2019

@ Kapadia Sir,

Can you please share any Notification/Circular or Provision from the IT Act 1961 regarding this matter.

As per my Knowledge, Securities Transaction Tax cannot be deducted as an expense for transfer and also it cannot be added to the cost of acquisition.

Other incidental charges like Brokerage, Commission etc is allowed. But STT is not allowed. Kindly confirm Sir

Warm Regards.

Kapadia Pravin (17249 Points)
Replied 15 December 2019

In case of person who is trading in securities and offering income/loss from such trading as business income, STT paid is allowed to be deducted as business expense under section 36.

STT is a kind of financial transaction tax which is similar to tax collected at source (TCS). STT is a direct tax levied on every purchase and sale of securities that are listed on the recognized stock exchanges in India.

Now one can say, admisiblity of STT as deduction is only for "deduction of expenses on transfer" and as cost of acquisition/improvement is dealt in section 55 the said proviso does not apply to STT paid at the time of acquisition.

At the same time, one can also argue that "deduction at the time of computing of capital gains" includes "cost of acquisition/transfer" and so STT is not to added to COA by virtue of same proviso.

One may have to enter into litigation or Higher Authority needs to clarify on this issue

I don't have right now any courts judgement references. But strictly to be on safer side, STT may be ignored from LTCG calculation.

However it's not convincing and will create mis-matches between investment A/c vs contract notes bill amount

Good point you have raised Shivam 👍