Securities Transaction Tax is a type of tax that is put on profits that come from securities. It comprises equities, Futures, and options. Securities Transaction Tax is a type of tax that is put on the transaction which happens on the Domestic Stock Exchange. The central government of India is held responsible for the collection of the tax. Securities Transaction Tax is a type of tax relating to the monetary transaction and is not very different from Tax Collected at Source (TCS). STT is a type of direct tax that is directly charged on any transaction of securities and it comes under the STT act. Securities Transaction Tax gets charged on Mutual Funds, derivatives, etc. The Government decides the Rate of Securities Transaction Tax which keeps on fluctuating from time to time.

Features of Securities Transaction Tax 

Securities Transaction Tax is not a complicated tax; it is easy to evaluate and to be put on. Some of the features of STT are given below:

• STT is charged for the sale of both Futures and Options.
• For making the calculations of STT easier, every future is priced on the price in which they got traded and every Options is priced on the price higher on which they got traded i.e. price at a premium.
• A member is held liable and has to pay all the STTs of the persons who are trading for him or under him

Securities on which STT is Applicable

The securities regulations act has defined securities as what does securities contains in terms of STT which are:

• Shares, stocks, bonds, debentures, or any other securities than can be bought and sold by any legal body or any other body. 
• Derivatives.
• All the securities of the government are equity in nature.
• Securities Transaction Tax is also charged on Mutual Funds.
• Securities transactions are taxed on units or any other indicator of the returns of the investment made by the investor on the scheme.
• Securities Transactions are taxed on all the debt scrutinizing instruments.
• Rights or interest that are shown on the securities.

STT Rate

The STT rate refers to the rate that is charged on the transaction of securities and it depends on the nature and the type of security.

How to Calculate STT?

Let us take the example of Ms. Alia who is an investor and is very active in the equity markets of India. She buys 1k shares of BCD Ltd. The price at which she bought the shares of BCD Ltd. Is 50 INR/share and he sells all those shares at 70 INR/ share. 

Here, the rate of intraday trading is 0.025%

So, STT = 0.025%*70*1000 = 17.50 INR.

And the rate of Futures and Options is 0.01%. Ms. Alia bought 5 lots of Futures, each lot having 100 shares at 3000 INR and selling them at 3050 INR. 

So, STT= 0.01%*3050*5*100 = 152.50 INR. 

Conclusion

Security Transaction Tax is not going to go anywhere and no one will be able to get rid of this no matter whether their transaction is for the sale or purchase of securities or mutual funds. When the year comes to an end, the person who is held liable (The person under which many people work and buys and sells securities for him) may tell his broker to provide him a certificate that states that the individual has paid STT on every transaction in that year. This certificate is very useful as using this certificate we can get a discount on the expenses of the business.