STT on Short / Long Term

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vipan (Querist)
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25 December 2007 my query is if Security Transaction Tax(STT) is paid by the assessee on trading of equity shares, whether Short Term /Long Term capital gain will be attracted?

kindly explain the same with brief provisions under the IT Act, STT Rules.

R.V.RAO

R.V.RAO (Expert)
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25 December 2007 ONLY LONG TERM CAPITAL GIANS ARE EXEMPTED FROM TAX FROM 01-10-2004 IF STT IS PAID AND TRANSACTED THROUGH A RECOGNISED STOCK EXCHANGE.
SHORT TERM CAPITAL GAINS ARE TREATED AS NORMAL INCOME OF ASSESSEE AND TAXED AT THE SLAB RATES THAT APLLY TO HIM/HER.
R.V.RAO

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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25 December 2007 Tax on short term capital gains in certain cases.

Section 111A.of Income Tax ACT states as under:
111A (1) Where the total income of an assessee includes any income chargeable under the head “Capital gains”, arising from the transfer of a short-term capital asset, being an equity share in a company or a unit of an equity oriented fund and—

(a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and

(b) such transaction is chargeable to securities transaction tax under that Chapter,

the tax payable by the assessee on the total income shall be the aggregate of—
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(i) the amount of income-tax calculated on such short-term capital gains at the rate of ten per cent; and
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(ii) the amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee:

Provided that in the case of an individual or a Hindu undivided family, being a resident, where the total income as reduced by such short-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such short-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such short-term capital gains shall be computed at the rate of ten per cent.

(2) Where the gross total income of an assessee includes any short term capital gains referred to in sub-section (1), the deduction under Chapter VI-A shall be allowed from the gross total income as reduced by such capital gains.

(3) Where the total income of an assessee includes any short term capital gains referred to in sub-section (1), the rebate under section 88 shall be allowed from the income-tax on the total income as reduced by such capital gains.

Explanation.—For the purposes of this section, the expression “equity oriented fund” shall have the meaning assigned to it in the Explanation to clause (38) of section 10.]

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