Date:30/10/2005 URL: http://www.thehindubusinessline.com/bline/iw/2005/10/30/stories/2005103001731500.htm

Back Broker on tax

T. Banusekar

MY BROKER deducts tax at source at 1.25 per cent of the value of shares on sale transactions as capital gains tax. Is this correct? Is there a provision in the Act for the broker to do so?

Srinivas G

Reply

It appears that your broker is not deducting tax at source but is collecting the Securities Transaction Tax (STT). The STT is applicable on all transactions of purchase and sale of shares or units on or after October 1,2004, where the transaction is through a recognised stock exchange. The STT is collected by the stock exchanges from the broker and in turn by the broker from the client.

You may note that long-term capital gains will be exempt and short-term capital gains will be taxed at 10 per cent, if the STT is paid on sale of shares.

These are provided for in Sections 10(38) and 111A respectively.

If the transaction results in a business income, the STT will be eligible for rebate to be adjusted against the tax payable in accordance with Section 88E of the Act.