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Securities Transaction Tax, What is STT, Rates of STT

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Securities Transaction Tax, What is STT, Rates of STT, Recently Amendments, Calculation of STT.  What do you mean by STT? What are the prevalent STT rates in India. Check Rates of Security Transaction Tax. If you are a stock market investor, you would know that your transactions are taxed to STT, but do you know what it is? This article will sum up everything related to STT. Rates of Security Transaction Tax. Now check more details about Securities Transaction Tax, What is STT, Rates of STT from below…

Securities Transaction Tax, What is STT, Rates of STT

Securities Transaction Tax STT, Rates of STT

What is STT?

STT refers to Securities Transaction Tax which is levied on the securities transactions (sale and purchase), which are carried out on stock exchanges. This tax was introduced by the Budget 2004 and is applicable since. Securities transactions include usual equity shares and derivative products (futures transaction and options transaction). So STT won’t be applicable on off market or OTC (Over The Counter) transactions. This tax was introduced to tax the securities transactions at source and to ensure that the tax evasion will be reduced to a large extent.

Recent announcements and amendments   

  • Budget 2012 revised the STT rates as applicable as per Budget 2004 (when STT was introduced). It revised STT rates for equity shares transactions (both on buying and selling transactions), which were dealt for the delivery of such shares.
  • This year again, Budget 2016 has revised the STT rate for a certain category (options transactions). This change was almost three times that of prevailing STT rates. Even though STT is charged on option premiums, it may not result in higher outflow. However, it has been expected to result in widening of Bid and Ask spread (difference between purchase price and sales price)

Rates of STT

Prevailing STT rates

Instrument and type of transaction STT rate
Equity shares – if opted for delivery (both purchase and sale) 0.10%
Equity shares – if traded same day (Intraday) and no delivery (applicable only for sale and no STT for purchase) 0.025%
Futures transactions – applicable to only sale (nil STT for purchasing) 0.010%
Options transactions – purchase transactions (STT would be applicable on the settlement price and only if it is exercised) 0.125%
Options transactions – sale transactions (STT would be applicable on the premium payable) 0.125%

How STT is calculated?

On turnover

The STT will be calculated on the total turnover of the sale or purchase transactions (except for options transactions). For e.g. if Mr. A purchased 100 equity shares of Rs. 10, then STT will be calculated as below (in case he opts for delivery).

STT = 100 x 10 x 0.10% =  Re. 1  

In such case, the purchaser will pay Rs.1001 for squaring off the purchase transaction for delivery.

Options transactions

With an amendment brought forward by the Budget 2016, STT on purchase and sale transactions for options is same @ 0.125%. However, it differs in the way it is levied. For purchase transactions, it is levied on settlement price which is exercised  and for sale transactions, it is levied on premium.

CONCLUSION

STT is just like a tax which is collected at the time of materializing an event (in this case sale or purchase of securities). It adds up to your purchase price and is deducted from your sale price. Hence, this may be crucial, if you are dealing in small portions of shares or small amount of transactions.

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About Yash Shah

Yash Shah is passionate article writer and has written more than 100 articles in the field of Finance, Insurance, Stock Market, Company Law, Auditing, Taxation and many others. In case of any queries or suggestions, you can reach the author @ [email protected], you can also catch him on facebook @ yashshah299

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