Buoyant market leads to 128% jump in STT receipt so far this fiscal

New Delhi: The buoyant stock market has led to a 128% jump in the mop-up of securities transaction tax (STT)—a direct tax collected from sale of listed shares—so far this year compared with a year ago. 

STT collection from 1 April  to 11 July in the current financial year stood at ₹16,634 crore, against ₹7,285 crore collected in the same time a year ago, according to the Central Board of Direct Taxes (CBDT).

This follows strong volume growth in the markets, as valuations stage a rebound after the national polls.

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Data from the Bombay Stock Exchange showed there have been 4.6 million trades a day an average so far this financial year compared with 3.3 million trades last financial year. 

The average daily turnover in the equity segment in the BSE so far this financial year has been ₹9,300 crore, compared with ₹6,622 crore last year.  Overall, the equity market turnover at the BSE stands at ₹6.6 trillion this financial year in 71 trading days, compared with ₹16.3 trillion in FY24 in 246 trading days.

Adding to overall collections

The strong jump in STT collection adds to the overall direct tax collections which stood at ₹5.74 trillion in the 1 April to 11 July the period, after tax refunds, showing a 20% growth annually, according to CBDT data.

Experts said the buoyancy in STT collections is in line with the surge seen in market volume. 

“The Indian stock markets are currently at a record high. This surge naturally leads to increased trading volumes as investors actively participate in the market, leading to a corresponding rise in STT collections. Also, foreign institutional investors and private equity firms may have capitalized on the market's upward trajectory, booking profits on their investments resulting in high STT collections at the time of exit,” said Amit Maheshwari, partner- tax at AKM Global, a tax and consulting firm.

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STT is collected on the sale and purchase of equity, derivatives and equity oriented mutual funds and unlisted shares sold as part of a public offer which would subsequently get listed on the stock exchanges. 

The rate of tax varies from 0.001% to 0.2% depending on the class of security. For instance, the rate is 0.1% in the case of delivery-based sale and purchase of equity shares. 

The income tax department has collected ₹6.45 trillion so far this financial year before adjusting for refunds, showing a 25% annual increase. It has refunded ₹70,902 crore so far this fiscal.