TDS return for securities transaction tax

Introduction

Securities Transaction Tax (STT) is a tax levied by the Indian government on all transactions executed on recognized stock exchanges in India. The tax is imposed on the purchase and sale of securities such as equities, derivatives, and mutual funds. To ensure compliance with STT regulations, the government mandates the submission of TDS (Tax Deducted at Source) returns by individuals and entities engaged in such transactions. In this blog, we will explore the TDS return for STT, how to file TDS return for it, and the tax rate for STT.

What is Securities Transaction Tax (STT)?

Securities Transaction Tax is a tax that is levied on the purchase and sale of securities in India. This tax is imposed on the transaction value of the security, which is paid by the buyer or seller, depending on the type of security. The STT is charged as a percentage of the transaction value, and the rates vary based on the type of security.

Why is TDS Return Important for STT?

TDS (Tax Deducted at Source) is a system of tax collection where the tax liability is deducted at the source of income. In the case of STT, the tax liability is deducted by the stock exchange or the depository, and the tax is deposited with the Income Tax Department. The TDS return is an important aspect of tax compliance, which helps the Income Tax Department to keep track of tax collection from various sources.

Suggested read: TDS rate chart

What are the taxable securities under STT?

The following securities are subject to Securities Transaction Tax:

1. Equity shares listed on recognized stock exchanges
2. Derivatives traded on recognized stock exchanges
3. Units of equity-oriented mutual funds traded on recognized stock exchanges
4. Security receipts issued by securitization companies and reconstruction companies
5. Bonds, debentures, and government securities are not subject to STT.

What is the tax rate for STT?

The tax rate for STT varies based on the type of security. For equity shares and derivatives, the tax rate is 0.1% of the transaction value. For equity-oriented mutual funds, the tax rate is 0.001% of the transaction value.

What is TDS Return for Securities Transaction Tax?

TDS Return is a statement that is filed with the Income Tax Department, which contains details of tax deducted at source and deposited with the department. In the case of STT, the stock exchange or the depository is responsible for deducting the tax liability and depositing it with the Income Tax Department. The TDS return for STT is filed using Form 26QB.

When should you file TDS Return for STT?

TDS return for STT should be filed quarterly within one month from the end of the financial quarter. The due dates for filing TDS returns are as follows:

• Quarter 1 (April to June): 31st July
• Quarter 2 (July to September): 31st October
• Quarter 3 (October to December): 31st January
• Quarter 4 (January to March): 31st May

How to file TDS Return for STT?

To file a TDS return for STT, follow the steps given below:

1.  Go to the NSDL e-TDS website and click on “TDS/TCS” under “e-Services”.
2. Click on “Online Filing of TDS/TCS Returns” and select Form 26QB for STT
3. Enter the required details such as the PAN of the buyer and seller, the amount of transaction, and the amount of STT deducted.
4. Verify the details and make the payment through net banking.
5. Once the payment is successful, the TDS certificate will be generated, which can be downloaded and saved for future reference.

What happens if you fail to file TDS Return for STT?

 If you fail to file a TDS return for STT, you may be penalized by the Income Tax Department. The penalty for late filing of a TDS return is Rs. 200 per day until the date of filing, subject to a maximum of the tax amount deducted. Therefore, it is important to file the TDS return within the due date to avoid penalties and ensure tax compliance.

Conclusion

TDS return is an important aspect of tax compliance, which helps the Income Tax Department to keep track of tax collection from various sources. In the case of STT, the TDS return is filed by the stock exchange or the depository, and the tax liability is deducted at the source. It is important to file the TDS return within the due date to avoid penalties and ensure tax compliance. By following the steps mentioned in this blog post, you can easily file your TDS return for STT and optimize your tax returns.