TAX ON STOCK TRADING
As
Int roduct ion – Tax on St ock Trading you know, all transactions that take place in the country are taxed. Stock market related transactions are not exempted from this rule. But the tax on stock trading in India differs from that on other financial transactions. In this article, we will discuss all taxes levied on stock market transactions and how they concur or differ based on duration of holding the securities. The different taxes we will look at include taxes on transactions and on capital gains.
Table of Contents Introd Tradin Stamp Goods Tax C STC G LTC G
Taxes on Transactions
When you take a trade on the stock market, you have to pay certain brokerage charges as well as other taxes levied on the transaction. Generally, these taxes are levied as a percentage of the transaction value and may differ based on the type of security (equity, derivatives, commodities, etc.). Now, let us look at the tax on share market trading in India and find out the different percentages for each segment and type of trade.
Securities Tax (STT) /Commodities Transaction Tax (CTT)
Prior to introduction of STT/CTT, people used to show fictitious net losses their trading and investments to avoid paying taxes on their income on trading in stopped evading trading transactions, on purchase mutual funds. Securities Transaction P. Chidambaram stock exchange where the transaction takes place.
STT rat es for Equit y Trading: Intraday Trades: STT is charged only on sell side at 0.025% of transaction atDeliveryvalue. S Futures of Options Contracts: Charged on premium value of the sell side transaction at There0.05%.is no STT on trading of Currency Derivatives.
Trades: STT is charged on both legs of the transaction, buy and sell, at 0.1% of transaction value.
Futures Contracts: 0.01% of the transaction’s sell side turnover, irrespective of whether it is an intraday or positional trade.
Options Contracts: Charged on premium value of the sell side transaction at There0.05%.isno STT on trading of Currency Derivatives.
STT rat es for Equit y
Trading: Intraday Trades: STT is charged only on sell side at 0.025% of transaction Deliveryvalue.
STT for Derivative Trading:
Contracts Trades: 0.0001% on buy side Commodity Futures Contracts Trading: 0.002% on buy side Commodity Options Contracts Trading: 0.003% on
CurrencysideFutures
Stamp Duty Rates: Equity Intraday Trades: 0.015% on buy side Equity Delivery Trades: 0.003% on buy side Equity Futures Trades: 0.002% on buy side Equity Options Trades: 0.002% on buy
Goods and Services Tax GST is a tax levied by the Government of India on trading since it is considered as components: SGST Services Tax). government while Brokerage, Transaction The trading
Capital Gains Tax Any profit that you book on your trades is subject to taxation. This taxation percentage is fixed for transactions on recognized exchanges if you have paid STT. If not, the capital gains are taxed according to the tax slab your annual income falls under. It is divided into two categories depending on the duration of the trade (which is calculated from date of acquisition of security to date of sale or transfer), Short Term or Long Term. Now let us take a look on income tax on share trading profit in India 2022.
LTCG LTCG refers to Long Term Capital Gains Tax. Long term refers to holding a trade for a duration of one year or more than one year. This tax is applicable at 10% of profit if the profit made from the trade is more than ₹1 lakh. This is applicable to gains made from selling your equity investments and on equityoriented mutual fund investments. It is not applicable to Derivatives trading of any segment since derivatives contracts have an expiry of one week or one
Priormonth.to Budget 2018, there was no Long Term Capital Gains tax on the profit made on long term investments. This tax was introduced in the financial budget of 2018 and is applicable only on gains starting from 1st February,
STCG STCG refers to Short Term Capital Gains Tax. Short term refers to holding a trade for a duration of less than one year. This includes tax on intraday trading as well as delivery trades and it is applicable on all types of securities traded on the stock markets. It is levied at 15% of the profit made from the trades.
Stock Market Losses Any losses made on the stock market can be offset against the gain or profit made by the trader. You can offset your short term losses against short term gains or long term gains whereas long term losses can only be offset against the long term gains. In case the loss is not entire set off against one year of capital gain, it can be carried forward for up to eight years from incurring the loss. But this can only be done if the taxpayer has filed it as a loss in that financial year’s income tax returns within the due date for tax filing. In addition to the various taxes on transactions and capital gains, there are a few other charges involved in trading on the stock market. SEBI (Securities Exchange Board of India) charges fees of ₹0.10 per lakh on Equity and Derivative trades, ₹0.15 per lakh on Currency Derivatives and Commodity Trading.
Derivatives
While this is not a tax and only a fee charged by SEBI, it also adds to the entire charge you pay for your trading transactions. Clearing Members charge a certain fee on derivatives trading in equity, currency, and commodities segment. Stock exchanges also charge the trader with certain Transaction Charges. These charges for different (National Securities Depository Limited), also charge is taken the trader or discussed above, This concludes our discussion on tax on share market trading in India. These taxes are above and beyond the brokerage charged by your stock market broker. We hope this has been useful and has helped you understand more about the charges on trading transactions and the taxes levied on them.
