Member of Stock Brokers Body, Association of National Exchanges India (ANMI) urged the government to re-introduce exemptions in Securities Transaction Tax (STT) and Commodity Transaction Tax (CTT) in Budget 2023 to increase volume and participation in the market. It said that India is the only country to levy STT and CTT duties in the derivatives and commodity segments.
In the proposal submitted to CBDT Chairman Nitin Gupta, ANMI has also demanded tax exemption of up to Rs 1 lakh in Short Term Capital Gains (STCG). “Since this STCG has also arisen after paying STT, it is desirable that STCG is also allowed tax exemption up to Rs 1 lakh. This will accelerate market participation and encourage investment.”
Like long-term capital gains (LTCG), STCG on equity shares is currently taxed at 15 per cent without any exemption. STT is levied separately.
ANMI has suggested reintroduction of exemption under section 88E in its recommendations before the Budget 2023-24. It added that the revenue implication on reintroduction of section 88E would result in an increase in the volume and hence a larger collection of Securities Transaction Tax (STT) and Commodity Transaction Tax (CTT).
What are STT and CTT?
Securities Transaction Tax (STT), which is similar to Tax Collected at Source (TCS), is a direct tax levied on the sale and purchase of securities listed on stock exchanges in India. STT is governed by the Securities Transaction Tax Act (STT Act) and the STT Act has specifically listed various taxable securities transactions on which STT can be levied.
When an investor buys or sells shares in the stock market, he has to pay STT. The tax rate is different for both intraday trading and delivery. STT of 0.025 per cent is being charged on the sale of shares in intraday trade. On delivery, STT of 0.1 per cent is paid on both purchase and sale.
CTT is also similar to STT. Introduced in the Finance Act, 2013, CTT is levied on non-agricultural commodities such as gold, silver, aluminum and crude oil. SS
What is capital gains tax?
Capital gains tax is a tax imposed on gains from the sale of property or investments. Currently, capital gains tax in India is levied on investment gains based on the lock-in or holding period. Investments in equity or equity-linked mutual funds held for more than a year are considered long-term, and gains above Rs 1 lakh are taxed at 10 per cent. Investments in equity up to one year are considered short term and are taxed at 15 per cent.
Now, as per reports, the government is planning to change its capital gains tax structure in Budget 2023-24 to bring parity across different asset classes like equity, debt and real estate, by taxing them uniformly. Currently it is different for different asset classes.
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