Securities transaction tax is a type of tax levied on gains from securities. This includes mainly equities and futures and options. The rate of taxation is different for different types of securities. STT can basically be understood as a type of tax levied on transactions done in the domestic stock exchange. Securities transaction tax is a direct tax and is levied and collected by the central government of India.
The most prominent point about securities transaction tax is that STT is applicable only on share transactions made through a recognized stock exchange in the country. Off-market share transactions are not covered under STT.
Securities transaction tax or STT was introduced in the year 2004 by the then Finance Minister, P. Chindambaram. This tax was introduced to avoid tax evasion in case of capital gains. Securities transaction tax, as the name itself implies is levied on the value of securities (except commodities and currency). In the year 2013, the government was made to cut down the rate of taxation for STT after a lot of protests by brokers and people from the trading community.
# Features of Securities Transaction Tax:STT is a simple direct tax and is not very complicated to calculate or levy. Some of the most distinguishing features of STT are as listed below.
* STT is levied on all sell transactions for both options as well as futures
* For purpose of STT calculation, each future trade is valued at the actual traded price while each option trade is valued at premium
* The amount STT that a clearing member has to pay is the sum total of all the STT taxes of trading members under him.
# Securities on which STT is Applicable:Securities transaction tax is levied on various types of transactions made on the domestic stock exchanges in India. According to the Securities Contract Act, 1956, following are the transactions covered under the same.
* Shares, bonds, debentures or any such marketable security which is traded at the stock market
* Derivatives traded in the market
* Units issued by any collective investment scheme to customers
* Government securities that are of the nature of equity
* Rights or interests in securities
* Mutual funds that are based on equity trading