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STT & Short term capital gain on shares

Suraj (735 Points)

02 May 2010

Dear All,

I would like to know about the treatment of securities transaction tax (STT) while determining the short term capital gain on shares and tax thereon. (Whether considered as cost of acquisition)

Also let me know if there is short term capital loss in last year and reported in ITR then whether same can be adjusted against current year's short term capital gain on shares.

Please explain.

Regards,

Suraj

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14 Replies

jatin kapoor (CA FINAL) (1586 Points)
Replied 02 May 2010

short term capital loss can be adjusted against thwe current year income

DT Fundas - Tarun rustagi ( Author) (1150 Points)
Replied 02 May 2010

dear suraj

stt can not form part of acquisition,also stt can not form part of transfer exp at the time of sale.benefit of set off can be availed of stcl against stcg as well as ltcg

DT Fundas - Tarun rustagi ( Author) (1150 Points)
Replied 02 May 2010

dear suraj

stt can not form part of acquisition cost ,also stt can not form part of transfer exp at the time of sale.benefit of set off can be availed of stcl against stcg as well as ltcg

vikash rathi (Chartered Accountant) (787 Points)
Replied 03 May 2010

agree with the above.....

Amir (Learner) (4016 Points)
Replied 03 May 2010

Dear Suraj,

Agree with above STT is not allowed as deduction in computing Capital Gains

Proviso to Sec 48 reads as under -

[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.]

1 Like

Suraj (735 Points)
Replied 03 May 2010

I read all above replies that comes to a conclusion that STT cannot be considered as a cost of acquisition.

But STT is a form of tax then can we deduct it from short term capital gain tax arrived @ 15%?? For example if STCG tax comes to Rs 1000 and STT deducted as shown in contract notes is Rs. 250 then can we deduct this Rs. 250 from Rs. 1000 and say net short term capital tax liability as Rs. 750??

Suraj (735 Points)
Replied 03 May 2010

I read all above replies that comes to a conclusion that STT cannot be considered as a cost of acquisition.

DT Fundas - Tarun rustagi ( Author) (1150 Points)
Replied 04 May 2010

dear suraj u r right that it is form of tax. but the duduction in respect of stt can not be availed under u/h capital gain.if u carried a business or profession then u can take benefit of this

Gopal Suthar (Chartered Accountant) (60 Points)
Replied 03 June 2010

agree with tarun

kantijain (Chartered Accountant in Practice) (385 Points)
Replied 03 June 2010

Dear suraj,

I agree with amir & further to ur query of reducing stt from income tax is not allowable as the law does not provide for it. also last year stc loss can be set-off against STCG provided the returns were filed within the due dates.

komal jain (student) (36 Points)
Replied 03 June 2010

hey ........STCG on which STT has been paid shall be liable for tax @ 15% u/s 111A.......it is not necessary that this section should provide benefit to the assessee.......if tax on STCG under normal rate is higher than the tax computed u/s 111A, then also he should pay tax @ 15%, in case of Company & Firm where flat rate 30% is imposed ....this section is beneficial as it reduces their tax liabilitty.......but no deduction of STT paid shall be allowed from the tax calculated u/s 111A

Nitesh Bhandari (Ca Finalist Articled Trainee) (93 Points)
Replied 03 June 2010

u Can take this income to PGBP based on tax benefits and amount of capital gains since if its assesed under PGBP slab structure applies else flat rate of 15%

Further STT can be claimed as deduction only from PGBP u/s. 36 1 (V) and not from CG.

PRATEEK (ACA) (102 Points)
Replied 03 June 2010

STT WOULD BE ADDED TO THE COST OF ACQUISITION AT THE TIME OF PURCHASE BUT IT WOULD NOT BE DEDUCTED FROM STCG ON ACCOUNT OF SALE .

B/F SHORT TERM CAPITAL LOSS CAN BE ADJUSTED BOTH FROM LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN OF THE CURRENT YEAR

KS Prakash (N A) (22 Points)
Replied 14 August 2012

Irrespective of head of Income, accounting may be carried on to show separately the STT at the time of Purchase and also at the time of Sale.

Trading in Securities, including Share Trading:

For taxation purposes, the STTs on both sides are eligible for deduction as Business Expenses u/s 36

Capital Gain:

The STT paid at the time of Purchase should be allowed to be part of cost of purchase. But the STT on Sale, cannot be deducted from the Sales Value since the Proviso to S.48 specifically disallows STT paid at the time of transfer of securities resulting a Capital Gain/Loss.

At the time of acquisition nothing happens ( no transfer resulting in CG/CL) except the assessee starts to own a capital asset, the cost of such should be all expenses paid by him including STT. Am I correct?