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Ms Choudhary reports on economic affairs. She tweets from the handle <em><a href="https://twitter.com/Shrimichoudhary" rel="nofollow" target="_blank">@Shrimichoudhary</a></em>

Securities Transaction Tax (STT)

Nirmala Sitharaman

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<div>
	Securities transaction tax (STT) is a tax levied at the time of purchase and sale of securities listed on stock exchanges in India. STT is governed by the Securities Transaction Tax Act (STT Act). Taxable securities include equity, derivatives, unit of equity-oriented mutual funds, unlisted shares sold under an offer for sale to the public included in initial public offering (IPO) and where such shares are subsequently listed in stock exchanges.</div>
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	<strong>Introduction of STT</strong></div>
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	This tax was introduced in Union Budget 2004 and came into effect from October 1, 2004. The aim behind the introduction of STT was curbing evasion of capital gains tax on profits earned by transacting in securities.</div>
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	<strong>What is STT rate? How is STT calculated?</strong></div>
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	The rate of STT is decided by the govt and it is similar to a tax paid at the source. The provisions of collection of STT work in a manner as tax deducted at source (TDS). STT is collected by a recognised stock exchange or lead merchant banker in case of an IPO. The rate of STT differs based on the type of security traded and whether the transaction is a purchase or a sale. For example, while buying an equity share, both the purchaser and the seller have to pay 0.1 per cent of the share value as STT.<br />
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	<table border="1" cellpadding="1" cellspacing="1" style="width: 500px">
		<tbody>
			<tr>
				<td>
					<span style="color:#800000;"><strong>Taxable securities transaction</strong></span></td>
				<td>
					<span style="color:#800000;"><strong>Rate of taxation</strong></span></td>
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					<span style="color:#800000;"><strong>Payable by</strong></span></td>
			</tr>
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					Sale of an option in securities</td>
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					0.017%</td>
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					Seller</td>
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			<tr>
				<td>
					Sale of an option in securities, where option is exercised</td>
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					0.125%</td>
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					Purchaser</td>
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					Sale of a futures in securities</td>
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					0.01%</td>
				<td>
					Seller</td>
			</tr>
		</tbody>
	</table>
</div>
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RELATED BUDGET TERMS

Learn what is Securities transaction tax, Securities transaction tax Definition, What is STT rate and more Securities transaction tax news at Business Standard.

What is Securities transaction tax, What is STT, What is STT rate, Securities transaction tax Definition

What is Securities Transaction Tax (STT)?

<div>
	Capital gains mean the profit earned by an individual on the sale of his investment in assets such as stocks, real estate, bonds, commodities, etc. Basically, it is the &#39;gain&#39; made on &#39;capital investment&#39;. In some tax jurisdictions &mdash; a country, state or city &mdash; capital gains are taxed if an individual sells an asset after holding it for a certain &#39;long&#39; period. This period is often twelve months. However, it could also be defined differently for various assets.&nbsp;</div>
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	In India, &#39;long-term&#39; and &#39;short-term&#39; are defined by the Income Tax Act, 1961. While a holding period of one year is considered &#39;long-term&#39; for equities, the same is two years for real estate.&nbsp;</div>
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	The Union Budget 2018 proposed to levy long-term capital gains tax (LTCG) of 10 per cent on gains exceeding Rs 100,000 from sale of equity shares. However, no change was made in the definition of short-term capital gains tax (STCG).</div>
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	LTCG on sale of shares / stocks was removed in 2005, making India one of the most liberal stock market regimes. However, there were demands from a section of stakeholders that the LTCG tax on equities be brought back. The BSE had reportedly told the government that the revenue forgone on the LTCG tax exemption on listed securities could be as high as Rs 50,000 crore per year.</div>
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	Another change that was made in the Union Budget 2018 was that an individual could get an exemption by investing long-term capital gains from the sale of house property in up to two house properties, against the earlier provision of investment in one house property with same conditions. However, the capital gains on the sale was restricted at Rs 2 crore for the exemption.</div>
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	The LTCG and STCG tax rates also vary based on the asset class &mdash; they might be different for equities, real estate, bonds, mutual funds etc &mdash; and the income tax slab an individual falls under.</div>
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Learn what is meant by Long-Term Capital Gains Tax, LTCG definition and more Long-Term Capital Gains Tax news here at Business Standard.

What is Long-Term Capital Gains Tax, LTCG Meaning, LTCG Definition, Long-Term Capital Gains Tax News

Long-term capital gains tax, or LTCG

<div>
	Fringe benefit tax (FBT) was a form of tax that companies paid in lieu of benefits they offered their employees in addition to the compensation paid to them. It was included by the Finance Act 2005 with effect from April 1, 2006. It was set at 30 per cent of the cost of benefits the company paid and it was aimed to bring under the tax net those benefits that were previously out of it. This tax was paid in addition to income tax, irrespective of whether or not the company had income-tax liability.</div>
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	<strong>What are fringe benefits?</strong></div>
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	Companies give some fringe benefits to all their employees and some only to those at the executive level for costs related to their work. Some others may also be extended for increasing general job satisfaction. Some of the common fringe benefits are telephone reimbursements, employer&rsquo;s contribution to the superannuation fund, and access to creche services. These could also include perks like tuition assistance, health insurance, childcare reimbursements, subsidised cafeteria, free bus service for commute, employee discounts and employee stock options.</div>
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	<strong>Why do companies offer fringe benefits to employees?</strong></div>
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	Companies use fringe benefits to motivate, recruit and retain high-quality employees at the organisation. Companies that compete for best talent in their field often offer extraordinary benefits.</div>
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	<strong>Abolition of the fringe benefit tax</strong></div>
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	Various provisions related to income tax on fringe benefits were modified by the Finance Act, 2006. Certain exemptions were clearly laid out with regard to what came under the purview of Fringe Benefit Tax. The Finance Act, 2009, abolished Fringe Benefits Tax completely, and now such perquisites are taxable in the hands of employees. These may include value of accommodation, leave travel concession, encashment of non-availed earned leaves, medical reimbursement and so on.</div>

Learn what is Fringe Benefit Tax (FBT), Fringe Benefit Tax Definition and more Fringe Benefit Tax news at Business Standard.

What is Fringe Benefit Tax, What is FBT, Fringe Benefits, Fringe Benefit Tax Definition

Fringe Benefit Tax (FBT)

<div>
	Short-term capital gain tax (STCG) is a tax levied on capital gains from the sale of an asset held for a short period.</div>
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	<strong>What are capital gains?</strong></div>
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	The gains or profits from sale of capital assets are classified as capital gains. The most common examples of capital assets are land, building, house property, gold, trademarks, equity shares, patents, leasehold rights, machinery, etc. If a capital asset is sold within government-defined short-term holding period, gains from it are known as short-term capital gains.</div>
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	<strong>How is STCG tax calculated?</strong></div>
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	After taking full value of an asset into account, deduct the expenditure incurred in connection with the transfer. Also, deduct the cost of acquisition and improvement costs. The remainder amount is the short-term capital gain, which is then taxed under STCG.</div>
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	<strong>How is short-term holding period defined?</strong></div>
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	The short-term holding period differs for various items. For security assets like shares listed on stock exchange, debentures, mutual funds, and government securities, the holding period is up to 12 months. For other immovable assets, such as land, property, the period is up to 24 months.</div>
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	<strong>Taxation and exemptions with rest to short-term capital gains</strong></div>
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	For securities, the tax rates are discussed under Section 111A of the Income-Tax Act. For instance, the short-term capital gains tax levied on listed equity shares is 15 per cent.</div>
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	There are certain exemptions to taxation on securities which do not fall under Section 111A. Short-term capital gains on sale of equity shares through unrecognised stock exchange, gains due to sale of any shares apart from equity shares, among others, do not attract any tax.</div>
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	In real estate, all property transactions attract short-term capital gains tax, provided property transfer happens within 24 months of ownership/purchase. Inherited property does not attract short-term capital gains tax. However, if one sells the inherited property, one has to pay tax on it. When short-term capital gains tax is levied on non-securities (such as property), it is added to the income-tax return, and the taxpayer is taxed according to their income-tax slab.</div>
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	Individuals who wish to claim deductions or exemptions on short-term capital gains can do so under Sections 80C to 80U of the Income Tax Act, provided short-term capital gains do not fall under Section 111A. In cases where gains fall under the ambit of Section 111A, individuals cannot opt for deductions under Sections 80C to 80U.</div>

Learn what is Short-term capital gains tax, Short-term capital gains tax Definition, STCG tax and more Short-term capital gains tax news here at Business Standard.

What is Short-term capital gains tax, STCG tax, Budget News, Short-term capital gains tax Definition

Short-term capital gains tax (STCG)

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	Dividend Distribution Tax (DDT) is a tax levied on dividends distributed by companies out of their profits among their shareholders.</div>
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	The Dividend Distribution Tax is taxable at source and is deducted at the time of the distribution. According to the law, DDT is levied at the hands of the firm, and the shareholder. An exception is that when a shareholder receives more than Rs 10 lakh in dividend, they have to pay an additional tax.</div>
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	Under the Income Tax Act, any domestic firm which is distributing dividends has to pay DDT at the rate of 15 per cent of the gross amount. At different times, governments of the day have imposed and removed Dividend Distribution Tax according to market needs.</div>
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	The Dividend Distribution Tax has to be paid to the government within 14 days of the dividend declaration. If not paid within the stipulated time, it has to be paid with an accumulated interest charged at the rate of 1 per cent per month. The tax is paid separately, over and above the company&rsquo;s income tax liability.</div>
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	Brokers, especially on Indian bourses, have been calling for Dividend Distribution Tax to be scrapped, since it leads to significant taxation of corporate earnings, making markets unattractive.</div>
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	Other than DDT, the Securities Transaction Tax (STT) and Long-Term Capital Gains (LTCG) tax are some major taxes levied on market instruments.</div>

Learn what is Dividend Distribution Tax (DDT), Dividend Distribution Tax (DDT) Definition, Dividend Distribution Tax (DDT) News and more here at Business Standard.

Securities Transaction Tax (STT)

What is Securities Transaction Tax (STT)?

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