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A Financial Transaction Tax which is kind of similar to TCS (Tax Collected at Source) is a Securities Transaction Tax or STT. STT can simply be said as a turnover tax in which the investor has to give a small portion of the total consideration the person has paid or received. STT is a direct tax that is charged on every sale and purchase of securities which are listed on the stock markets of India. Securities Transaction Tax is regulated according to the Securities Transaction Tax Act and all the important taxable transactions are listed there.
Securities Transaction Tax
Securities Transaction Tax is a tax that is charged upon the profits that a person makes while trading securities. This generally comprises futures and options and equities. There is a wide range of rates of taxes that are determined according to security. STT can simply be said as a turnover tax in which the investor has to give a small portion of the total consideration the person has paid or received. STT is a direct tax that is charged on every sale and purchase of securities which are listed on the stock markets of India. Securities Transaction Tax is regulated according to the Securities Transaction Tax Act and all the important taxable transactions are listed there. One of the key points about Securities Transaction Tax is that it is applied only on transactions that take place on the stocks that are listed in the recognised stock market of India.
List of Securities
There is a list of securities on which STT is levied such as:
- All the types of shares, debentures and bonds which are listed and traded in the Stock Market in India.
- Derivatives that are traded in the market.
- Units that are issued through a collective investment scheme to the buyers.
- Government securities that are of a capital nature.
- Security interests.
- Equity trading based mutual funds.
Rate of Security Transaction Tax
The Securities Transaction tax rate can be classified into a lot of categories. Let us look at the rates of the same.
Taxable security transactions | Rate of STT | The person responsible for paying STT | Value on which STT payable |
Buying Equity Shares | 0.10% | Purchaser | Purchasing price of equity shares* |
Selling Equity Shares | 0.10% | Seller | The selling price of Equity shares* |
Selling a part of an oriented mutual fund | 0.00% | Seller | The selling price of the unit sold* |
Selling a part of mutual funds which are equity-oriented | 0.03% | Seller | The selling price of the equity share or the unit which is sold* |
Derivative: Selling of an option security | 0.02% | Seller | Option premium |
Derivative: Selling an option that is a part of securities and is where it is exercised | 0.13% | Purchaser | Settlement price |
Selling of derivatives (futures) in securities | 0.01% | Seller | The price at which the derivative is sold |
Selling a part of an equity-oriented fund to the mutual funds | 0.00% | Seller | The selling price at which the fund is sold |
Selling of shares that are not listed. It can also be an IPO (Initial Public Offering) and these types of shares will get listed eventually. | 0.20% | Seller | Price of the shares at the time of IPO* |
STT=Rate*Selling Price*Number of shares
For example,
Rate = 0.025%
Selling Price = Rs.70
Number of Shares = 1000
STT = 0.025% * 70 * 1000 = Rs. 17.50
Conclusion
STT is a type of direct tax which needs to be paid in every transaction. As soon as someone purchases or sells STT is levied instantly on the transaction. The addition of STT increases the total cost of the transaction. One of the key points about Securities Transaction Tax is that it is applied only on transactions that take place on the stocks that are listed in the recognised stock market of India.
