News: On October 6, 2025, the Supreme Court decided to examine a plea challenging the constitutional validity of the Securities Transaction Tax under the Finance Act, 2004.
About Securities Transaction Tax (STT)
- It is a direct tax on every purchase and sale of securities listed on recognised stock exchanges in India.
- Introduced in: It was introduced in 2004.
- Aim: It was introduced to combat tax evasion in the stock market.
- STT is currently 0.1% on both buy and sell sides for stock trades.
- Taxable securities include equity, derivatives, and units of equity-oriented mutual funds.
- It also covers unlisted shares sold under an offer for sale in an IPO that are later listed.
- Legislative backup
- Imposed under the Finance Act, 2004.
- Governed by the Securities Transaction Tax Act, which lists taxable transactions, valuation rules, and the liable party (buyer or seller).
- Concerned with Securities Transaction Tax
- Double taxation: STT taxes the same transaction twice. A trader first pays STT on the transaction value and then pays Short-Term Capital Gain (STCG) or long-term capital gains (LTCG) on the profit from the same transaction.
- Constitutional concern: STT taxes the act of trading rather than profits which violates Articles 14, 21, and 19(1)(g) of the Constitution.
