Securities Transaction Tax

a.b.acharya addl.asst.director

1.Basic Concept:

Securities Transaction Tax

Security Transaction Tax has been levied on the value of taxable security transactions The provisions relation to the transaction tax are contained in Chapter VII of the Finance (No.2) Act, 2004, and shall take effect from October,1st 2004. 2. Charge of Securities Transaction Tax: Securities Transaction Tax is applicable in respect of the following transactions1. Purchase or Sale of equity shares in a company or a derivative entered in to in a recognized stock exchange or units of an equity oriented fund,. 2. Sale of unity of an equity oriented fund to the mutual fund.
Equity oriented fund means a fund set up under a scheme of mutual fund and more than 65% of the total proceeds of the fund is invested in equity shares in domestic companies.

3. Valuation of taxable securities :

The value of taxable securities transactions shall be computed as follows: a) in the case of a taxable securities transaction relating to a derivative (being options in securities) it shall be the aggregate of the strike price and the option premium of such option in securities b) in the case of any other taxable securities transaction relating to a derivative (being future), it shall be the price at which such futures is traded and c) in the case of any other securities transaction, it shall be the price at which such securities are purchased or sold.

4. Rates of taxes:
Purchase of Sale of Equity Equity Shares/ Shares/ Mutual Fund Mutual Fund Unit Unit Sale of derivati ves Sale units to Mutual Fund

Rates applicabl e From

June 2006 1, 0.125% 0.1%

Delivery based

NonDelivery Based
0.025% 0.02% 0.017% 0.025% 0.0133 % 0.01% 0.2%

0.125% 0.1%

01/06/05 to 30/05/06 01/10/04 to 31/05/05

0.075%

0.075%

0.015%

0.15%

5. Collection/Recovery of Securities Transaction Tax : Every recognized stock exchange shall collect the Securities Transaction Tax from every person being a purchaser and seller of taxable securities in the stock exchange at the rates stated above. However, in the case of sell of mutual fund, it shall be collected by the prescribed person in the mutual fund. The amount of Securities Transaction Tax collected as aforesaid has to be paid to the credit of the Government by 7th day of the month following the month in which the tax is collected.

6. Return :

Person responsible for Return to be filed in Form filing Return respect of No. A recognized stock exchange All taxable securities Form transactions entered No. 1 into during a financial year on that stock exchange All taxable securities Form transactions of No. 2 sale/purchase of units of mutual fund.

Due Date 30th June Every year 30th June Every year

A prescribed person in every mutual fund

 Procedure

Issue of Notice : The AO may issue notice to furnish return Assessment : Section 92 provides for Assessment to determine
tax payable / refundable. No assessment can be made after expiry of 2 years

Rectification : Interest :
one year

Mistakes apparent form records can be rectified within

Penalty : *For failure to collect STT

A simple interest @ 1% P.M. where Securities Transaction Tax not credited to the government account by the collector

Appeals : Section 100 provides Appeal to CIT(A)/ITAT Prosecution : Section 102 provides for Punishment by way of imprisonment
for 3 years with fine for false verification

- 100% of the tax not collected * For no payment of STT Collected - Rs. 1000/- Per Day * For failure to furnish Return - Rs. 100/- Per Day * For failure to comply with notice - Rs.10000/- for each failure