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STT hike: EXPLAINED – What’s penalty on delayed, failed payment for Securities Transaction Tax? Details

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March 28, 2023 35 Views0
The Finance Bill 2023-24, which was passed in the Lok Sabha through a voice vote on Marcah 24 (Friday), has as many as 75 amendments. Among them, a hike in securities transaction tax (STT) on options by 23.5 percent and futures by 25 percent is one of the important updates.
As per the latest amendments, option traders will have to pay Rs 6,250 for every Rs 1 crore worth of turnover as against Rs 5,000 that is being paid currently, which translates into a hike of around 25 percent.
Also, traders will now have to pay STT of Rs 1,250 on Rs 1 crore of turnover while selling futures.

What is Securities Transaction Tax (STT)?

STT is a direct tax charged on the purchase and sale of securities listed on the exchanges in India. STT is calculated on the average price and does not follow the FIFO (First In, First Out) or LIFO (Last In, First Out) methods.According to Economic Times, the objective behind the levy is to mitigate tax evasion as the same is taxed at source. Stocks, futures, option, mutual funds, and exchange traded funds come under the ambit of STT.

Interest on delayed payment of securities transaction tax

According to Income Tax Department, “Every assessee who fails to credit the securities transaction tax or any part thereof as required under section 100, to the account of the Central Government within the period specified in that section, shall pay simple interest at the rate of one percent of such tax for every month or part of a month by which such crediting of the tax or any part thereof is delayed.”

Penalty for failure to collect or pay securities transaction tax

Any assessee who—(a) fails to collect the whole or any part of the securities transaction tax as required under section 100; or

(b) having collected the securities transaction tax, fails to pay such tax to the credit of the Central Government in accordance with the provisions of sub-section (3) of that section,
shall be liable to pay,—
(i) in the case referred to in clause (a), in addition to paying the tax in accordance with the provisions of sub-section (4) of that section, or interest, if any, in accordance with the provisions of section 104, by way of a penalty, a sum equal to the amount of securities transaction tax that he failed to collect; and
(ii) in the case referred to in clause (b), in addition to paying the tax in accordance with the provisions of sub-section (3) of that section and interest in accordance with the provisions of section 104, by way of penalty, a sum of one thousand rupees for every day during which the failure continues, so, however, that the penalty under this clause shall not exceed the amount of securities transaction tax that it failed to pay.

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