The tax rate for Securities Transaction Tax (STT) varies depending on the type of security and the nature of the transaction.

Key Features of Securities Transaction Tax (STT)

Understanding the features of STT is crucial for traders and investors to comply with regulations and optimize their trading strategies. Here are the key features of STT:

1. Applicability: STT is applicable to transactions executed on recognized stock exchanges in India, including the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). It covers a wide range of securities, including equity shares, derivatives, and equity-oriented mutual funds.
2. Transaction-Based Tax: Unlike other taxes that are based on income or profits, STT is levied on the transaction value of securities. This means that the tax is payable irrespective of whether the transaction results in a profit or loss.
3. Automatic Deduction: STT is automatically deducted by the stock exchange at the time of the transaction. This ensures seamless compliance and eliminates the need for traders and investors to calculate and pay the tax separately.
4. Tax Deductibility: For traders and investors, STT paid can be claimed as a deduction under the head of business income while computing taxable income. However, it cannot be claimed as a deduction under the head of capital gains.
5. Tax Exemption: STT paid on transactions in equity shares and equity-oriented mutual funds qualifies for exemption from long-term capital gains tax, provided the securities are held for more than one year. This exemption encourages long-term investment in the stock market.
6. Revenue Generation: STT is a significant source of revenue for the government. By taxing securities transactions, the government aims to generate revenue while promoting transparency and accountability in the stock market.