What is Securities Transaction Tax?

Securities Transaction Tax (STT) is a kind of tax to be paid to the government for financial transactions in certain type of securities through stock exchanges and mutual funds. Presently STT is charged on shares, derivatives and equity oriented mutual funds. You don’t notice this because the broker adds it to the total charges when you buy/sell on the exchange. 

STT tax was introduced in 2004 and effectively acts as a deterrent in frequently churning investments. It was actually introduced to stop capital gains tax avoidance (by not declaring transaction) but you end up paying it irrespective of whether you make a gain or loss. To view new STT rates check the ready reckoner STT Rate.

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