Securities Transaction Tax

Securities Transaction Tax

Securities Transaction Tax (STT) is a tax levied by the Indian government on the purchase and sale of securities listed on Indian stock exchanges. It was introduced in 2004 to simplify the tax structure and reduce the incidence of tax evasion. STT is applicable to all securities transactions including equity shares, derivatives, and mutual fund units. In the case of mutual funds, STT is levied on the sale of equity-oriented mutual funds, which include those schemes where at least 65% of the portfolio is invested in equities.

The rate of STT applicable to mutual fund transactions is relatively low compared to other securities. Currently, the STT rate on sale of equity-oriented mutual funds is 0.001%, which means that if you sell mutual fund units worth Rs. 1 lakh, you will have to pay an STT of Rs. 1. However, this small tax can add up over time and reduce the overall returns from your mutual fund investments. It’s important to keep in mind that STT is not applicable to investments made in debt-oriented mutual funds or other types of non-equity mutual funds.

In conclusion, Securities Transaction Tax (STT) is a tax levied on the purchase and sale of securities listed on Indian stock exchanges, including mutual funds. STT is applicable to equity-oriented mutual fund transactions where at least 65% of the portfolio is invested in equities. The current rate of STT applicable to the sale of equity-oriented mutual funds is 0.001%. While the tax rate is relatively low, it can still impact the overall returns from your mutual fund investments.

Securities Transaction Tax (STT) is levied on every purchase or sale of securities that are listed on the Indian stock exchanges. This would include shares, derivatives or equity-oriented mutual funds units. While exiting the scheme, the investor will have to bear a (STT) @ 0.001% of the value of selling price.

The rate of tax that is deducted is determined by the central government, and it varies with different types of transactions and securities. STT is deducted at source by the broker or AMC, at the time of the transaction itself, the net result is that it pushes up the cost of the transaction done.