Stt

3795 views 6 replies

bj shrestha

student

71 Points Posted on 18 October 2012

I have a query:

A company invests in securities of different companies through a portfolio Management company.

While purchasing Shares, it incures all expenses, brokerage , STT etc. Now my query is Whether that STT is included in Cost of Shares(Investment) or not?

Can that STT be shown as expenses in P/L Account?

Further, In the Statement given by the Portfolio Company, STT was not shown as Cost of Shares.

Please suggest the best Accounting Treatment.

Replies (6)

Guest

Be clear with the difference between accounting and taxation...

In Accounting, STT is an expense which you have to debit to Investments Account.

In taxation, STT is an expense which cannot be claimed so u/s 40. It too don't deny its very nature of expense. It will just say that is a disallowable expense.

bj shrestha

student

71 Points Posted on 18 October 2012

thanx for info.

It means In accounting, STT is charged to profit & loss A/c, right?

Guest

No, You seem to have misinterpreted my words.

It will go into investment account and there by added to the cost or reduced from sale consideration. Only profit or loss on sale of investments will come into Profit and Loss account.

Clear???

bj shrestha

student

71 Points Posted on 18 October 2012

ok then why it was not included in cost of shares in statement of Portfolio company?

even my boss told me to charge STT to p/l account.......

Guest

For accounting purpose, there is no need to distinguish between purchase value and STT. Whatever you have paid will be cost and what ever you received is sale consideration.

Portfolio managers have to serve their statements to its customers both for income tax and accounting purpose.So they have to show that seperately.

Once again be clear between accounting and taxation......

Guest

Accounting of Investments

Purchase Value		1020
Cost	1000
STT	12.5
Brokerage	7.5

Sale		1475
Value	1500
STT	13.5
Brokerage	11.5

Accounting
Investment A/c Dr.	1020
To Bank A/c

Bank A/c Dr.	1475
To Investment A/c		1020
To Profit and Loss A/c		455

Taxation
Sale	1488.5	(1500-11.5)
Purchase	1007.5	(1000+7.5)
Profit	481