The Securities Transaction Tax was introduced in the Union Budget of the 2004-2005 as a shift in the taxation of capital gains on financial securities. Transactions in equity shares, derivatives and sale of units of equity-oriented funds entered in a recognized stock exchange come under the purview of Securities Transaction Tax. Before the introduction of Securities Transaction Tax, the profit on sale of securities like shares, debentures, bonds, units of Mutual Funds, etc. was calculated in different ways and was also subject to income-tax at different rates depending upon the period of holding. STT is a neat, efficient and easy-to-administer tax and it has the great advantage of virtually eliminating tax avoidance. The STT is applicable at different rates on the value of the “taxable securities transaction,” which again is defined to mean a transaction of purchase and sale of securities entered into in a recognized stock exchange in India.
