Securities Transaction Tax
As the name suggests itself, STT (Securities Transaction Tax) is one of the multiple taxes to be paid to the Central Government of India. STT is the tax payable on the transaction value of taxable securities. In other words STT is the tax applicable to the sale / purchase of Equities, Derivatives, Equity oriented fund units done by a recognized stock exchange in India and also to the sale of Equity oriented funds units to mutual funds.
Definition – “Securities”
“Securities” is defined in Section 2(h) of the Securities Contracts (Regulation) Act, 1956, to include:
Shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate
Derivatives
Units or any other instrument issued by any collective investment scheme to the investors in such schemes
Security receipt as defined in section 2(zg) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
Government securities
Such other instruments as declared by the Central Government
Rights or interest in securities.
Applicability
STT is applicable on the various securities as explained above and it applicability varies with the type of security and the transaction type (Buy / Sell)
STT applicable on Equities
Intraday: 0.0125% of Turnover by the seller.
Delivery: 0.10% of Turnover by both buyer & Seller.
STT applicable on Derivatives
Futures: 0.01% of Turnover by the seller
[Note: STT rate on Sale of Futures in securities has been revised from 0.017% to 0.010% via the 2013 Budget. Revised rated would be effective 1st June 2013]
Options: 0.017% of the premium by the seller
Options: 0.125% of the Settlement Price i.e. (Number of Lots * Lot Size * Strike Price), in case of option exercise by the purchaser
[Note: Options: the STT is 0.125% of the settlement price (number of lots * lot size * settlement price) in case the option is exercised by the purchaser and the Option is an In-The-Money Option]
STT applicable on Equity Oriented Funds
Applicable at the rate of 0.25% by the seller
Summary of the STT rates is given in the table below
Product
Transaction
STT rate
Charged on
Equity-Delivery Buy
Sell 0.1%
0.1% Turnover
Turnover
Equity-Intraday Buy
Sell N/A
0.025% N/A
Turnover
Futures Buy
Sell N/A
0.01% N/A
Turnover
Options Sell
Buy 0.017%
0.125% Premium
Settlement price on exercise
Equity-Fund Units Sell 0.25% Transaction Value
In case of Commodities, it is known as the Commodities Transaction Tax (CTT).
In his 2013-14 Budget speech, Finance Minister P. Chidambaram had stated that CTT — on the lines of the Securities Transaction Tax (STT) in the capital market — would be levied on non-farm items to be paid by the seller only in futures trading. Thus CTT is applicable on Futures in commodities (except exempted agricultural commodities) at the rate of 0.01% of the turnover payable by the seller.
Rebate in Income Tax
STT paid rebates are to be allowed in computing one’s income-tax as per section 87 in accordance with and subject to the provisions of 88E: Rebate in respect of securities transaction tax.
Link: http://law.incometaxindia.gov.in/DIT/ (Search for Section 88E)
STT Certificate
A certificate known as Form 10dB can be obtained from the member of the recognized stock exchange and can be claimed under the above rebate for the purpose of Income Tax
Link: http://law.incometaxindia.gov.in/DITTaxmann/IncomeTaxRules/pdf/itr62Form10DB.pdf
Important links for STT / CTT By Recognized Exchanges
http://www.nseindia.com/products/content/derivatives/equities/sec_tranc_tax.htm
http://www.bseindia.com/markets/derivatives/derireports/STT.aspx?expandable=6
http://www.mcxindia.com//Uploads/ExchangeCircular/2013/June/English/Circular222-2013.zip
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