Securities Transaction Tax - Income Tax - Ready Reckoner - Income Tax

Securities Transaction Tax Securities transaction tax has been levied on the value of taxable securities transactions. The provisions relating to the transaction tax are contained in Chapter VII of the Finance (No. 2) Act, 2004 , and shall take effect from October 1, 2004. Charge of security transaction tax:- Securities transaction tax is applicable in respect of the following transactions- Purchase or sale of an equity share in a company or a derivative or a unit of an equity oriented fund or unit of a business trust, entered into in a recognized stock exchange. Sale of unlisted equity shares under an offer for sale to the public included in an initial public offer ( applicable from July 1, 2012 ). Sale of unlisted units of a business trust by an holder of such units which were acquired in consideration of a transfer referred to in section 47(xvii) of the income-tax Act under an offer for sale to the public included in an initial offer and where such units are subsequently listed on a recognized stock exchange (applicable from June 1, 2015). Sale of unit of an equity oriented fund to the mutual fund. As per of the Securities Contracts (Regulation) Act, 1956 , STT would be applicable for securities of the following nature. Shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate. Derivatives Units or any other instrument issued by any collective investment scheme to the investors in such schemes Security receipt as defined in section 2(zg) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Government securities of equity nature. Such other instruments as declared by the Central Government. Rights or interest in securities. Equity-oriented mutual funds. STT is not applicable for any off-market transaction. Type of security Type of transaction Applicable STT Delivery based Equity shares Purchase and 0.125% on total value (i.e no shares multiplied by per share price ) Equity oriented Mutual Funds Redemption of units 0.25% Equity shares, Equity mutual fund units- Intra-day. Purchase NIL 0.025% on total value Derivative-sale of option 0.017% Derivative-sale of option, where option is exercised Purchase 0.125% Derivative Sale of futures 0.017% Sub-clause(ab) is inserted in clause (13) of section 97 with effect from 1-6-2015 to provide that taxable securities transaction shall also include sale of unlisted units of a business trust by any holder of such units which were acquired in consideration of a transfer referred to in clause (xvii) of section 47 of the Income-tax Act, 1961 under an offer for sale to the public included in an initial offer and where such units are subsequently listed on a recognised stock exchange purchase 0.2% Equity oriented fund:- If the following two conditions are satisfied, the fund is known as equity oriented fund - More than 65% (up to May 31, 2006 - 50%) of the total proceeds of the fund is invested in equity shares in domestic companies, and The fund has been set up under a scheme of mutual fund. For the above purpose, the percentage of equity share holding of the fund shall be computed with reference to the annual average of the monthly averages of the opening and closing figures. Value of Taxable securities:- The value of a taxable securities transaction shall be computed as follows:- In the case of a taxable securities transaction relating to a derivative (being option in securities), it shall be the aggregate of the strike price and the option premium of such option in securities. 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 In the case of any other taxable securities transaction, it shall be the price at which such securities are purchased or sold. The Board may specify (having regard to the manner in which taxable securities transaction are settled in a recognized stock exchange), the method of determining the price of securities for the aforesaid purpose. Collection and recovery of tax:- Securities transaction tax is collected as follows:- Every recognized stock exchange shall collect the securities transaction tax from every person being a purchaser and seller of taxable securities in that stock exchange. In the case of sale of units to the mutual fund, it shall be collected by the prescribed person in the mutual fund. In the case of initial public offer, it shall be collected by the lead merchant banker. Deposit of tax:- The amount of securities transaction tax collected by the aforesaid persons has to be paid to the credit of the Government by seventh day of the month following the month in which the securities transaction tax is collected. Return:- A recognized stock exchange/prescribed person in every mutual fund shall be responsible for submission of a return in the prescribed form ( Form No. 1 for stock exchange, Form No. 2 for mutual fund ) of all taxable securities transactions entered into during a financial year on that stock exchange or, as the case may be, in respect of all taxable securities transactions, being sale of units to such mutual fund during such financial year. Such return should be submitted on or before June 30 after the end of the financial year. A revised return can be submitted before the assessment is made, in case of discovery of any omission or wrong statement in the return earlier furnished. Penalty:- The following penalties may be imposed on a recognized stock exchange/ mutual fund- If the recognized stock exchange/ mutual fund fails to collect whole or any part of securities transaction tax. In addition of paying tax and interest, a penalty which is equal to 100 per cent of the amount of tax which is not collected may be imposed. If after collecting such tax, it is not paid to the credit of the Government within the specified time. In addition of paying tax and interest, a sum of ₹ 1,000 for each day during which the default continues may be imposed. If the recognized stock exchange/ mutual fund fails to furnish return within the time given under section 91(1) or in response to notice. Rs.100 per day for which the default continues. If any person has failed to comply with a notice under section 92(1) . In addition of paying tax and interest, a sum of ₹ 10,000 for each day during which the default continues may be imposed. Notes:- If the assessee proves that there was reasonable cause for the above failure, penalty cannot be imposed. No order of imposing penalty can be made unless the assessee has been given a reasonable opportunity of being heard.