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SecuritiesTransaction

Taxa.b.acharya

addl.asst.director

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Securities Transaction Tax1.Basic Concept:

Security Transaction Tax has been levied on the value of taxable

security transactions The provisions relation to the transactiontax 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

transactions-1. Purchase or Sale of equity shares in a company or a derivative

entered in to in a recognized stock exchange or units of an equityoriented 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 fundand more than 65% of the total proceeds of the fund is invested in equityshares in domestic companies.

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3. Valuation of taxable securities :

The value of taxable securities transactions shall becomputed as follows:a) in the case of a taxable securities transaction relatingto a derivative (being options in securities)it shall be

the aggregate of the strike price and the optionpremium of such option in securitiesb) in the case of any other taxable securitiestransaction relating to a derivative (being future), itshall be the price at which such futures is traded and

c) in the case of any other securities transaction, itshall be the price at which such securities are purchasedor sold.

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4. Rates of taxes:

Purchase of

Equity Shares/Mutual Fund Unit

Sale of Equity

Shares/ Mutual FundUnit

Sale of

derivatives

Sale units

to MutualFund

Rates

applicabl

e

From

Delivery

based

Non-

Delivery

Based

June 1,2006

0.125% 0.125% 0.025% 0.017% 0.025%01/06/05

to

30/05/06

0.1% 0.1% 0.02% 0.0133

%

0.2%

01/10/04

to

31/05/05

0.075% 0.075% 0.015% 0.01% 0.15%

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5. Collection/Recovery of Securities Transaction Tax :

Every recognized stock exchange shall collect theSecurities Transaction Tax from every person being apurchaser and seller of taxable securities in the stock

exchange at the rates stated above. However, in the caseof sell of mutual fund, it shall be collected by theprescribed person in the mutual fund.

The amount of Securities Transaction Taxcollected as aforesaid has to be paid to the credit of the

Government by 7th day of the month following the monthin which the tax is collected.

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6. Return :

Person responsible for

filing Return

Return to be filed in

respect of

Form

No.

Due

Date

A recognized stock

exchange

All taxable securities

transactions entered

into during afinancial year on that

stock exchange

Form

No. 1

30th

June

Everyyear

A prescribed person in

every mutual fund

All taxable securities

transactions of

sale/purchase ofunits of mutual fund.

Form

No. 2

30th

June

Everyyear

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Procedure Issue of Notice : The AO may issue notice to furnish return

Assessment : Section 92 provides for Assessment to determinetax payable / refundable. No assessment can be made after expiry of 2 years

Rectification : Mistakes apparent form records can be rectified withinone year

Interest : A simple interest @ 1% P.M. where SecuritiesTransaction Tax not credited to the government account by the collector Penalty : *For failure to collect STT - 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

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