Consider the following statements regarding the Securities Transaction Tax (STT) in India:
- It was introduced to replace the system of taxing profits from the stock market under capital gains, which was prone to evasion.
- It is administered by the Central Board of Indirect Taxes and Customs (CBIC).
- It is applicable to transactions in equity-oriented mutual funds and Exchange-Traded Funds (ETFs).
- The tax is automatically deducted by the stockbroker and then remitted to the stock exchange.
Which of the statements given above are correct?
Explanation: The Securities Transaction Tax (STT) is a direct tax on the purchase and sale of securities on recognized stock exchanges in India, introduced in 2004. It is administered by the Central Board of Direct Taxes (CBDT).
Objective and Rationale
Before 2004, taxing profits from stock trading as capital gains was prone to evasion. STT was created as a transparent, upfront tax collected at the point of transaction to ensure compliance and curb tax evasion. This has improved tax collection from the capital market.
Structure and Applicability
STT applies to transactions involving:
- Equity shares of listed companies
- Derivatives (futures and options)
- Equity-oriented mutual funds and ETFs
The tax is automatically deducted by the stock exchange and deposited with the government.
Explanation: The Securities Transaction Tax (STT) is a direct tax on the purchase and sale of securities on recognized stock exchanges in India, introduced in 2004. It is administered by the Central Board of Direct Taxes (CBDT).
Objective and Rationale
Before 2004, taxing profits from stock trading as capital gains was prone to evasion. STT was created as a transparent, upfront tax collected at the point of transaction to ensure compliance and curb tax evasion. This has improved tax collection from the capital market.
Structure and Applicability
STT applies to transactions involving:
- Equity shares of listed companies
- Derivatives (futures and options)
- Equity-oriented mutual funds and ETFs
The tax is automatically deducted by the stock exchange and deposited with the government.