What Is Stt,stamp Charges,transaction Charges?

Can anyone please explain me about what is stt, stamp charges and transaction charges and is that differ from scrip to scrip?

Taxation of Capital Gains on Financial Securities
For years together, the profit on sale of securities like shares, debentures, bonds, units of Mutual Funds, et al, was calculated in different ways and was also subject to income-tax at different rates depending upon the period of holding.

The Paradigm Shift
However, the Finance (No 2) Bill, 2004 introduced by the honourable Finance Minister, Mr P Chidambaram, while presenting his much awaited Union Budget 2004-2005, has ushered a paradigm shift in the taxation of profits on financial securities with effect from assessment year 2005-2006 (financial year from April 1, 2004 to March 31, 2005).

Securities Transaction Tax
The Budget proposes to introduce a “securities transaction tax” (STT). In the words of Mr P Chidambaram, 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 recognised stock exchange in India on or after the date on which Chapter VII of the Finance (No 2) Bill, 2004 comes into force (i.e. the specified date) and is payable by the buyer and the seller of the securities. For this purpose, “securities” are defined under section 2(h) of the Securities Contracts (Regulation) Act, 1956 (SCRA) to include:

(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

(ii) derivative;

(iii) units or any other instrument issued by any collective investment scheme to the investors in such schemes;

(iv) security receipt as defined in section 2(zg) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(v) Government securities;

(vi) such other instruments as declared by the Central Government; and

(vii) rights or interest in securities.

After the presentation of the Budget on July 8, 2004, Mr P Chidambaram has recently announced that securities would be defined to include equity-oriented mutual funds (not debt-oriented mutual funds) but exclude debt instruments. Further, under Section 2(f) of the SCRA, a “recognised stock exchange” means a stock exchange, which is for the time being recognised by the Central Government under Section 4 thereof.

Moreover, the value of “taxable securities transaction” is to be determined as under:

Option in securities: The aggregate value of the strike price and option premium

Futures: The price at which such futures are traded

Other securities: The purchase price for a purchaser and the selling price for a seller

The rates of STT on different securities, which apply to taxable securities transaction entered into on or after the specified date are as under:

Therefore, when one buys securities on or after the specified date, STT is to be paid irrespective of the future holding period giving rise to long-term or short-term capital gains or business profits; and the investor or trader earning a profit or suffering a loss. But, in the case of day-traders, arbitrageurs and derivative traders, who are paying income-tax on business profits, for non-delivery-based and delivery-based transactions, credit for STT will be available against the income-tax payable on business income there on.

Change In The Taxation Of Long-Term And Short-Term Capital Gains
In respect of securities, as defined above, sold on or after the specified date on a recognised stock exchange in India, as defined above, long-term capital gains will be exempt under the proposed Section 10 (38) of the Income-tax Act, 1961 (the Act). Similarly, under the proposed section 111A of the Act, short-term capital gains on securities, as defined above, sold on or after the specified date on a recognised stock exchange in India, as defined above, will be taxed at a rate of 10 per cent before levy of surcharge (for an individual and a Hindu undivided family having taxable income not exceeding and exceeding Rs 850,000 at nil and 10 per cent respectively and for others at the rate of 2.50 per cent) and education cess of 2 per cent on the aggregate of income-tax and surcharge taken together for all other taxpayers. However, in respect of securities sold before the specified date or after the specified date, which does not meet the conditions stipulated above, would be taxable before the levy of surcharge and education cess at the following rates: Long-term capital gains: 10 per cent without indexation benefit or 20 per cent with indexation benefit, whichever is lower.

Short-term capital gains: At The Regular Rate Of Income Tax
There is no change in the taxation of business income, which is taxed at the regular rate of income-tax except that credit would be available for STT from the income-tax payable i.e. income-tax on business profits would be reduced by the amount of STT.

Conclusion
Thus, investors and traders need to carefully plan sale of their existing holdings after considering which mode is more beneficial - old (before the specified date) or new (on or after the specified date), especially in the case of losses since long-term capital loss on securities on or after the specified date cannot be setoff against taxable long-term capital gains on other capital assets. Further, in the case of new or future holdings, with the drastic reduction in tax rates, one needs to now focus more on returns than on taxes.

Hi,

I couldn't understand the explanation to the fullest. In a nutshell:

What are the tax applicable(and the percentage) on shares for
1) delivery shares(long term shares)
2) day trading

Thanks,
Praveen.