Securities transaction tax (STT) is levied on the value of taxable securities transactions traded on recognised stock exchanges

Your stock market transactions could fund Budget's income tax relief : Govt expects to get 40% more from STT It is a direct tax levied on the investors, on every sale of securities. Stock exchanges, mutual funds, insurance companies, and lead merchant bankers are entrusted with collecting the tax on behalf of the government

Prabhakar K S

Prabhakar K S is the founder & CEO of Shree Tax Chambers, a tax advisory firm.

The finance minister in her recently presented Budget documents 'Receipt Budget 2025-26' has estimated to collect Rs. 78,000 crore from Securities transaction tax (STT). The latest projections are a 40% (Rs 23,000 crore) increase from the revised estimate of Rs. 55,000 crore for the current financial year (FY2024-25) and 63% more than Rs. 33,778 crore reaped in the previous financial year.

Trump-Modi Meet

The mega MIGA, MAGA plans of India's Modi and US' Trump
Trump says India has more tariffs than others
Trump's 'golden rule' for imposing reciprocal tariffs
Since the levy is linked to secondary stock market's performance, the collection will go up or down with the movement of the share market. Post-pandemic buoyancy in the stock market is likely to sustain and come in handy to offset the revenue forgone on new individual tax rate changes and achieve the next year's target.
Securities transaction tax (STT) is levied on the value of taxable securities transactions traded on recognised stock exchanges. It is a direct tax levied on the investors, on every sale of securities. Stock exchanges, mutual funds, insurance companies, and lead merchant bankers are entrusted with collecting the tax on behalf of the government. It was introduced on October 1, 2004, to replace the earlier system of levy of stamp duty on securities transactions, to curb speculative trading, generate additional revenue and address the then rampant tax evasion on capital gains. It is levied on the buyer and seller of the securities.

Are all securities transactions subject to levy?
It is levied only on the following transactions - 1) Purchase or sale of a listed equity share of a company, a derivative, a unit of equity-oriented mutual fund and a unit of business trust. 2) Sale of unlisted equity shares under an offer for sale to the public or an initial public offer. 3) Sale of unlisted units of a business trust by any holder of such units acquired for consideration under an offer for sale to the public or an initial public offer and subsequently listed on a registered stock exchange. 4) Sale or surrender or redemption of a unit of an equity-oriented fund of an insurance company on maturity or partial withdrawal related to a ULIP issued on or after February 1, 2021.

Preference shares, government securities, bonds, debentures, and units of mutual funds other than equity-oriented are not subject to STT. In addition, those transactions entered by any person for or on behalf of the new pension system and a recognised stock exchange in an international financial service centre, for instance, transactions executed on GIFT-IFSC exchanges.

Value of taxable securities for calculating STT
Options - for computing the levy of STT, , each option trade is valued at the premium. Futures - at the actual value traded price. Any other taxable securities transactions - the price of such securities purchased or sold.

Artificial Intelligence(AI)
Java Programming with ChatGPT: Learn using Generative AI
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
Basics of Generative AI: Unveiling Tomorrows Innovations
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
Generative AI for Dynamic Java Web Applications with ChatGPT
By - Metla Sudha Sekhar, IT Specialist and Developer
Marketing
Performance Marketing for eCommerce Brands
By - Zafer Mukeri, Founder- Inara Marketers
Artificial Intelligence(AI)
Mastering C++ Fundamentals with Generative AI: A Hands-On
By - Metla Sudha Sekhar, IT Specialist and Developer
Finance
A2Z Of Money
By - elearnmarkets, Financial Education by StockEdge
Artificial Intelligence(AI)
Master in Python Language Quickly Using the ChatGPT Open AI
By - Metla Sudha Sekhar, IT Specialist and Developer
Office Productivity
Zero to Hero in Microsoft Excel: Complete Excel guide 2024
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
AI and Analytics based Business Strategy
By - Tanusree De, Managing Director- Accenture Technology Lead, Trustworthy AI Center of Excellence: ATCI
Artificial Intelligence(AI)
AI-Powered Python Mastery with Tabnine: Boost Your Coding Skills
By - Metla Sudha Sekhar, IT Specialist and Developer
Web Development
Advanced C++ Mastery: OOPs and Template Techniques
By - Metla Sudha Sekhar, IT Specialist and Developer
Astrology
Vastu Shastra Course
By - Sachenkumar Rai, Vastu Shashtri
Finance
Crypto & NFT Mastery: From Basics to Advanced
By - CA Raj K Agrawal, Chartered Accountant
Data Science
SQL for Data Science along with Data Analytics and Data Visualization
By - Metla Sudha Sekhar, IT Specialist and Developer
Legal
Complete Guide to AI Governance and Compliance
By - Prince Patni, Software Developer (BI, Data Science)
Web Development
A Comprehensive ASP.NET Core MVC 6 Project Guide for 2024
By - Metla Sudha Sekhar, IT Specialist and Developer
Technology
Certified Jenkins Professional
By - Vskills, India's Leading Certification Body
Office Productivity
Mastering Microsoft Office: Word, Excel, PowerPoint, and 365
By - Metla Sudha Sekhar, IT Specialist and Developer
Marketing
Digital marketing - Wordpress Website Development
By - Shraddha Somani, Digital Marketing Trainer, Consultant, Strategiest and Subject Matter expert
Web Development
Mastering Full Stack Development: From Frontend to Backend Excellence
By - Metla Sudha Sekhar, IT Specialist and Developer
Finance
Financial Literacy i.e Lets Crack the Billionaire Code
By - CA Rahul Gupta, CA with 10+ years of experience and Accounting Educator
Leadership
Business Storytelling Masterclass
By - Ameen Haque, Founder of Storywallahs
Marketing
Future of Marketing & Branding Masterclass
By - Dr. David Aaker, Professor Emeritus at the Haas School of Business, UC Berkeley, Author | Speaker | Thought Leader | Branding Consultant

STT is levied at what rate?

The Central Government revises the tax rates periodically. The latest STT tax rates are effective from October 1, 2024.

The purchase of equity shares, units of an equity-oriented mutual fund, units of a business trust on delivery based - STT is applicable at 0.1% on equity shares, units of a business trust payable by the purchaser and other units at 'nil' rate.

The sale of equity shares, units of equity-oriented mutual fund, units of a business trust on delivery-based - STT is applicable at 0.1 % on equity shares and units of a business trust and other units at 0.001%. In case of non-delivery based or intraday transactions, the sale of equity shares, units of an equity-oriented mutual fund, units of business trust - STT is applicable at 0.025% payable by the seller.

Sale of derivatives i.e. Option and Futures - In case of sale of option on premium - STT is applicable at 0.1% payable by the seller and in case of sale of an option where the option is exercised - STT is applicable at 0.125% payable by the purchaser. In case of sale of Futures - STT is applicable at 0.02% payable by the seller. The stock exchange is required to collect the tax from the purchaser and seller as the case may be.

Sale of equity-oriented fund units to the mutual fund or surrender or redemption of a unit of an equity-oriented fund on maturity to/by an insurance company - STT is applicable at 0.001% payable by the seller. Mutual funds and insurance companies will collect the tax as such.

Sale of unlisted equity shares under an offer for sale to the public, sale of unlisted units of a business trust - STT is applicable at 0.2% payable by the seller. The Lead merchant banker is required to collect the same.

Is the STT levy eligible to be claimed as an exemption or deduction?
There was an tax exemption that could be claimed for STT paid up to March 31, 2018. However, it was withdrawn thereafter.

A deduction can be claimed on the amount paid as STT during a financial year (FY) provided income arising from such transactions is declared in the taxpayer's income under the head 'Profits and Gains of Business or Profession while filing the return of income for that FY.

Prabhakar K S is the founder & CEO of Shree Tax Chambers, a tax advisory firm.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

This story originally appeared on: India Times - Author:Faqs of Insurances