The
Securities Transaction Tax (STT) is a tax that is levied on the purchase or
sale of securities such as stocks, mutual fund units, and futures and options
contracts. The tax was introduced in India in 2004 and is collected by the
government on behalf of the Securities and Exchange Board of India (SEBI).
The STT is
levied on both the buyer and seller of securities and is calculated as a
percentage of the transaction value. The tax rate varies depending on the type
of security being traded and the exchange on which the transaction takes place.
For example, the STT rate for equity delivery trades is currently 0.1% of the
transaction value for both the buyer and seller, while the rate for equity
futures trades is 0.01% of the transaction value for the seller only.
The STT is
designed to be a simple and efficient way of collecting revenue for the
government while also discouraging speculative trading in the securities
market. By imposing a small tax on each transaction, the STT is intended to
reduce the volume of short-term trades and promote long-term investments.
While the
STT has been criticized by some traders and investors for adding an additional
cost to transactions, it has also been credited with helping to improve the
efficiency and transparency of India's securities market. The tax revenue
collected through the STT is used to fund SEBI's regulatory activities,
including investor education, market surveillance, and enforcement activities.
Overall, the
STT is an important component of India's securities market infrastructure and
plays a key role in regulating and funding the country's growing financial
markets.