The securities transaction tax (STT) is here to stay even under the proposed new regime for direct taxes slated to come into force from April 1 next year. But the rate of STT now hinges on the firming up of a revised taxation regime for capital gains and the flow of funds to the capital market, a senior Finance Ministry official said.

A new regime for taxation of capital gains has been proposed in the revised discussion paper on Direct Taxes Code released on Tuesday.

“When we say calibration in the revised paper, we mean that the rate of STT would be decided based on the flow of funds into the capital market and also how the revised regime on capital gains is finalised,” Mr S.S.N. Moorthy, CBDT Chairman, told here.

He said that the Central Board of Direct Taxes does not yet have a view on what the STT rate should be.

In the revised discussion paper, the Finance Ministry has proposed that STT would be levied under the new Direct Taxes Code. This is in variance to the position in the first discussion paper released in August 2009 wherein it was mentioned that STT would be done away with.

The STT was sought to be abolished as the DTC had proposed to bring all capital gains to taxation as normal income while removing the distinction between long-term and short-term capital gains.

Now, in the revised paper, the Finance Ministry has proposed to withdraw the tax exemption on gains from transfer of listed shares/units of equity schemes held for more than one year.

Under the proposed regime, a deduction will be allowed at a specified percentage of gains, in respect of gains on transfer of listed equity shares/units of equity oriented funds held for more than one year from the end of financial year in which they were acquired.

No indexation would be allowed. The adjusted capital gain after deduction will be taxed at applicable rates. The specified percentage of deduction will be finalized in the context of overall tax rates.

The CBDT is now going in for the middle path by retaining STT (but calibrating the rate) and at the same time partly bringing to tax the capital gains made from transfer of listed shares held for more than a year, say tax experts.

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  1. Jaichand says:

    The STT is a meaningless tax for the intraday trader.It does keep tax evasion in check in case of longer term traders, but why does an intraday trader have to pay a tax on every trade he makes, irrespective of whether or not the trade was a profitable one.This is the next low the Indian economy will stoop to, even losses will be taxed thanks to our beloved netas.Jai Hind!

  2. M.Shoaib says:

    Changes are there from the previous proposed amendments. Who knows about further changes yet to be made on advice of big-big in the country.The cat may not die due to washing but due squeesing.

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September 2021