What is the full form of STT?
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STT stands for Securities Transaction Tax.
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Securities Transaction Tax (STT) is a tax levied on the purchase and sale of securities listed on recognised stock exchanges in India. The tax is applicable to equity shares, derivatives, and equity-oriented mutual funds. It is collected by the government to regulate market transactions and ensure transparency in securities trading.
Securities Transaction Tax (STT) is a direct tax imposed on transactions conducted on stock exchanges. It applies to both buyers and sellers of certain financial instruments, such as equities and derivatives. The tax is deducted at the source by the exchange and is remitted to the government.
STT is charged as a percentage of the transaction value and is applicable at the time of buying or selling securities. The rate of STT varies based on the type of security and the nature of the transaction, such as delivery-based equity trades, intra-day trades, or derivatives.
STT is levied on various securities, including:
Order Type | Rate of STT | Applicable on |
Delivery-based equity trade (buy) | Nil | - |
Delivery-based equity trade (sell) | 0.1% | Transaction value |
Intraday equity trade (buy) | Nil | - |
Intraday equity trade (sell) | 0.025% | Transaction value |
Equity futures (sell) | 0.0125% | Transaction value |
Equity options (sell) | 0.0625% | Premium amount |
Exercise of options | 0.125% | Settlement price |
Sale of unlisted shares under IPO | 0.2% | Transaction value |
STT is computed as a percentage of the transaction value or premium amount, depending on the security type. For example, if an investor sells equity shares worth Rs. 1,00,000 in a delivery-based trade, STT at 0.1% would amount to Rs. 100.
STT is levied on transactions occurring on recognised stock exchanges and is collected by the exchange at the time of trade execution. The collected tax is then deposited with the government.
STT serves as a regulatory measure to ensure transparency in securities trading. It contributes to government revenue and simplifies tax collection by integrating it into stock market transactions.
STT is considered while calculating capital gains tax. For equity investments held for over a year, long-term capital gains tax is applicable, where STT payment is a prerequisite for eligibility under preferential tax rates.
Aspect | Securities Transaction Tax (STT) | Capital Gains Tax |
Applicability | Stock market transactions | Gains from asset sales |
Payment | Deducted at the time of trade | Paid during tax filing |
Refundable | No | Not applicable |
Purpose | Regulatory and revenue generation | Taxing investment gains |
Securities Transaction Tax (STT) is levied on transactions involving securities traded on recognised stock exchanges. It ensures streamlined tax collection and contributes to government revenue. The tax impacts different categories of investors and traders based on their trading activity. Understanding STT rates and implications can assist in planning investment strategies effectively.
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STT stands for Securities Transaction Tax.
STT was introduced to simplify the taxation of securities transactions and to prevent tax evasion.
STT was introduced in India in the financial year 2004-05.
STT applies to equity trades, derivatives transactions, and equity-oriented mutual fund transactions conducted on recognised stock exchanges.
No, STT applies only to specified securities traded on recognised stock exchanges. Certain off-market transactions are exempt.
If an investor sells equity shares worth Rs. 1,00,000 in a delivery-based trade, STT at 0.1% amounts to Rs. 100.
STT is collected by stock exchanges and remitted to the government.
As per recent changes, the STT rate for equity futures is 0.0125% on the transaction value, and for options, it is 0.0625% on the premium amount.
STT increases transaction costs, which may affect short-term traders more than long-term investors.
STT rates have been revised periodically. Changes are announced through budgetary provisions and government notifications.
STT is a direct tax, as it is charged on securities transactions at the time of trade execution.
Non-payment is generally not an issue, as STT is deducted at the source by stock exchanges.
STT is considered while calculating capital gains tax but cannot be claimed as a deduction.
No, STT is not refundable.
Certain debt-oriented mutual funds and non-equity securities are exempt from STT.
STT is applicable on stock exchange transactions, but off-market transactions, such as direct stock transfers, may not attract STT.
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