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{{use dmy dates|date=December 2016}}
{{use Indian English|date=December 2016}}
{{taxation}}
'''Securities Transaction Tax''' (STT) is a tax payable in [[India]] on the value of [[Security (finance)|securities]] (excluding commodities and currency) transacted through a recognized [[stock exchange]]. As of 2016, it is 0.1% for delivery based [[equity trading]].<ref name="ET">{{cite news|title=Definition of Securities Transaction Tax|url=http://economictimes.indiatimes.com/definition/Securities-Transaction-Tax|accessdate=24 October 2016|publisher=Economic Times|date=10 October 2016}}</ref>

STT does not apply to off-market transactions or on [[commodity]] or currency transactions.<ref>{{Cite web|date=2019-11-17|title=What is Securities Transaction Tax?|url=https://www.financialexpress.com/what-is/securities-transaction-tax-meaning/1767057/|access-date=2020-10-20|website=The Financial Express|language=en-US}}</ref> The original tax rate was set at 0.125% for a delivery-based [[Equity (finance)|equity]] transaction and 0.025% on an intra-day transaction.<ref>{{Cite web|title=What is Securities Transaction Tax? Definition of Securities Transaction Tax, Securities Transaction Tax Meaning|url=https://economictimes.indiatimes.com/definition/securities-transaction-tax|access-date=2020-10-20|website=The Economic Times}}</ref> The rate was set at 0.017% on all [[Options (finance)|Futures and Options]] transactions.

STT was originally introduced in 2004 by the then [[Finance minister|Finance Minister]], [[P. Chidambaram]] to stop tax avoidance of [[capital gains tax]]. The government reduced this tax in the 2013 budget after protests for years by the [[Broker|brokers]] and the trading community. The revised STT for delivery-based equity trading is 0.1% on the turnover. For Futures, the tax has been reduced to 0.01% on the sell-side only. For Equity Options, the STT has been reduced to 0.05% on the sell side of the premium amount. The rest of the tax structure remains as is.<ref>{{Cite web|title=Budget 2013: Govt to reduce securities transaction tax on certain segments - Indian Express|url=http://archive.indianexpress.com/news/budget-2013-govt-to-reduce-securities-transaction-tax-on-certain-segments/1081180|access-date=2020-10-20|website=archive.indianexpress.com}}</ref> STTis a [[direct tax]].<ref>{{Cite web|title=Securities Transaction Tax (STT) - Arthapedia|url=http://arthapedia.in/index.php?title=Securities_Transaction_Tax_(STT)|access-date=2020-10-20|website=arthapedia.in}}</ref>

The STT is levied and collected by the [[Union Government of India|union government of India]].<ref>{{Cite web |url=http://lawmin.nic.in/legislative/Finance%20(No.2)%20Act,2004.htm# |title=Archived copy |access-date=1 July 2015 |archive-url=https://web.archive.org/web/20151215145701/http://lawmin.nic.in/legislative/Finance%20(No.2)%20Act,2004.htm# |archive-date=15 December 2015 |url-status=dead |df=dmy-all }}</ref>
STT can be paid by the seller or the purchaser depending on the transaction. [[Securities Contracts (Regulation) Act, 1956|The Securities Contract (Regulation) Act]], 1956 defines Securities the transaction of which are taxable under STT..<ref>{{Cite web|title=Tax Laws & Rules > Acts > Securities Transaction Tax|url=https://www.incometaxindia.gov.in/pages/acts/securities-transaction-tax-act.aspx|access-date=2020-10-20|website=www.incometaxindia.gov.in}}</ref><ref>{{Cite web|last=Barwar|first=Virendra|date=2019-07-30|title=what is securities transaction tax stt|url=https://taxjankari.com/what-is-securities-transaction-tax-stt/|url-status=live|archive-url=|archive-date=|access-date=2020-10-20|website=Tax Jankari|language=en-US}}</ref>

==Scope of STT==
According to the [[Securities Contracts (Regulation) Act, 1956|Securities Contracts (Regulation) Act]], 1956, STT would be applicable on following securities:<ref>http://www.indiainfoline.com/article/research-articles/what-is-securities-transaction-tax-41560288_1.html</ref>
* Shares, [[Bond (finance)|bonds]], [[Debenture|debentures]], debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate
* [[Derivative (finance)|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 of equity nature
* Rights or interest in securities
* Equity-oriented [[Mutual fund|mutual funds]]

STT is not applicable for any off-market transaction.<ref name="iifl">{{cite web|title=STT - Basics of securities transaction tax|url=http://www.indiainfoline.com/article/research-articles/what-is-securities-transaction-tax-41560288_1.html|website=IIFL|publisher=India infoline|accessdate=24 October 2016}}</ref>

==STT Computation<ref>http://www.nseindia.com/products/content/derivatives/equities/sec_tranc_tax.htm</ref>==
As per the [[Finance Act 2004]], and modified by Finance Act 2008 (18 of 2008) STT on the transactions executed on the Exchange shall be as under:
{| class="wikitable"
|-
! Sr.No. !! Taxable securities transaction !! New rate from<br>01.06.2016 !! Payable by
|-
| a || Sale of an option in securities || 0.05% || Seller
|-
| b || Sale of an option in securities, where option is exercised || 0.125% || Purchaser
|-
| c || Sale of a futures in securities || 0.01% || Seller
|}
Note that [[Service Tax]], [[Surcharge (payment systems)|Surcharge]] and Education Cess are not
applicable on STT.
* Value of taxable securities transaction relating to an "option in securities" shall be the [[option premium]], in case of sale of an option in securities.
* Value of taxable securities transaction relating to an "option in securities" shall be the settlement price less the strike price,<ref>http://pib.nic.in/PressReleaseIframePage.aspx?PRID=1577423</ref> in case of sale of an option in securities, where option is exercised.

==Income Tax and STT==

Taxation of profit or loss from securities transactions depends on whether the activity of purchasing and selling of shares / derivatives is classified as investment activity or business activity.

Treatment of STT also depends upon whether the [[income]] from these securities transactions are included under the head “Income from Capital Gains” or under the head ‘Profits and Gains of Business or Profession’.

===Scenario 1: Income from [[Capital gain|Capital Gains]]===
This refers to the scenario where the assessee is either Salaried or is engaged in some other business or profession and trading in securities is not the main line of business. In such cases gains or losses from securities transactions are taxed under the head “Income from Capital Gains”.

Gains or losses are subject to [[Short term capital gains tax|Short Term Capital Gains]] (STCG) or [[Long term capital gains tax|Long Term Capital Gains]] (LTCG) tax depending upon the period of holding, i.e., if the holding period is less than 1 year, gains are classified as STCG and if the holding period is equal to or greater than 1 year, gains are classified as LTCG. Any equity share, which has been sold through a recognized [[stock exchange]] and on which STT has been paid and if it comes under LTCG, it'll be taxed at 10% whereas in case of STCG of such shares, the gains shall be taxed only at 15%, plus [[Surcharge (payment systems)|surcharge]] and education cess under section 111A of the Act.

=== Scenario 2: Profits and Gains of Business or Profession===
This refers to the scenario where main business of the assessee is trading in securities. In such cases the gains or losses are classified as business income, which is taxed at the regular rate of [[Income tax|income-tax]].

STT paid in respect of taxable securities transactions entered into in the course of business shall be allowed as deduction under section 36 of the [[The Income-tax Act, 1961|Income-tax Act]]. Until 31 March 2008, the amount of STT paid was allowed as rebate under section 88E of the Income-tax Act. However, with effect from 1 April 2008, rebate available under section 88E has been discontinued.

==References==
{{reflist}}

{{Taxation in India}}

[[Category:Taxation in India]]
[[Category:Stock exchanges in India]]
[[Category:Capital markets of India]]

Securities Transaction Tax - Revision history

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