The Securities Transaction Tax in India is a tax charged on acquiring or selling securities listed on an Indian-recognised stock exchange. It was implemented in India in 2004 to generate funds for the government while deterring speculative transactions.
The Securities Transaction Tax is levied on selling or purchasing securities listed on an Indian stock exchange. It is calculated based on the transaction value, the price at which the securities were purchased or sold. The stock exchange collects STT and deposits it with the government. Derivatives, equity shares, equity-oriented mutual funds, and exchange-traded funds (ETFs) are all subject to tax.
Here is how STT is calculated for various securities types:
STT for derivatives is computed at 0.01% on the sale transaction value. The seller is liable for paying the Securities Transaction Tax rate based on the entire transaction value.
STT is assessed at a rate of 0.1% on the selling transaction's transaction value for equity shares. The seller is responsible for paying the STT based on the entire transaction value.
STT is levied at a rate of 0.001% on the transaction value of the selling transaction for ETFs. The seller is responsible for paying the STT, computed based on the entire transaction value.
For equity-oriented mutual funds, STT is charged at 0.001% on the redemption value of the units. The STT is calculated on the redemption value and is paid by the mutual fund house.
For traders and investors, STT is charged for their transactions and is part of their expenses. To make wise financial decisions, they must thoroughly understand the STT calculation and its effects. Moreover, keeping track of all your finances and managing them is essential to simplify your financial health.
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The government of India collects all taxes levied on Securities Transaction Tax.
Here are the current STT rates applicable in India as of May 2023:
It is important to note that these STT rates may be subject to change based on the government's regulations and policies.
No, the Securities Transaction Tax is not considered taxable income for individuals or companies in India. However, gains or profits from the sale of securities are taxable as per the Income Tax Act.
Here’s an example:
The STT rate for equity delivery trades is 0.1% on the transaction value. If an individual buys and sells shares worth ₹1,00,000, they will have to pay an STT of ₹100 on this transaction. The STT is automatically deducted and collected by the government through the stock exchange where the transaction takes place.
