a   tr   t re in ndia     17.9
     done on the domestic commodity derivatives            which can be deducted from the income instead of
     exchanges. Globally, commodity derivatives are        treating the same as an advance tax paid. [The 2004
     also considered as financial contracts. Hence         STT provisions provided that the STT payments
     CTT can also be considered as a type of ‘financial    of professional traders, whose ‘business income’
     transaction tax’.                                     arising from purchase and sale of securities could
          The concept of CTT was first introduced in the   be set off against their total tax liability.]
     Union Budget 2008–09 . The government had then             As on date, STT is not applicable in case
     proposed to impose a commodities transaction tax      of preference shares, government securities, bonds,
     (CTT) of 0.017 per cent (equivalent to the rate       debentures, currency derivatives, units of mutual
     of equity futures at that point of time). However,    fund other than equity oriented mutual fund, and
     it was withdrawn subsequently as the market was       gold exchange traded funds and in such cases, tax
     nascent then and any imposition of transaction        treatment of short-term and long-term gains shall
     tax might have adversely affected the growth          be as per normal provisions of law.
     of organised commodities derivatives markets               Transactions of the shares of listed companies
     in India. This has helped Indian commodity            on the floor of the stock exchange or otherwise,
     exchanges to grow to global standards [MCX is         mandated under the regulatory framework of
     the world’s No. 3 commodity exchange; globally,       SEBI, such as takeover, buyback, delisting offers, etc.,
     MCX is No. 1 in gold and silver, No. 2 in natural     also does not come under STT framework. The
     gas and No. 3 in crude oil].                          off-market transactions of securities (which entails
                                                           changes in ownership records at depositories) also
        securiTies TransacTion Tax                         does not attract STT.
     The Securities Transaction Tax (STT) is a type
                                                              capiTal Gains Tax
     of ‘financial transaction tax’ levied in India on
     transactions done on the domestic stock exchanges.    This is a direct tax and applies on the sales of all
     The rates of STT are prescribed by the central        ‘assets’ if a profit (gain) has been made by the owner
     government through its budget from time to time.      of the asset—a tax on the ‘gains’ one gets by selling
     In tax parlance, this is categorised as a direct tax. assets. The tax has been classified into two—
     The tax came into effect from 1 October, 2004.             (i) Short Term Capital Gain (STCG): It
     In India, STT is collected for the Government of                  applies ‘if the Asset has been sold within
     India by the stock exchanges. With charging of                    36 months of owning it’. In this case the
     STT, long-term capital gains tax was made zero                    ‘rate’ of this tax is similar to the normal
     and short-term capital gains tax was reduced to                   income tax slab. But the period becomes
     10 per cent (subsequently, changed to 15 per cent                 ‘12 months’ in cases of shares, mutual
     since 2008).                                                      funds, units of the UTI and ‘zero coupon
          The STT framework was subsequently                           bond’—in this case the ‘rate’ of this tax is
     reviewed by the central government in the year                    15 per cent.
     2005, 2006, 2008, 2012 and 2013 . The STT rates           (ii) Long Term Capital Gain (LTCG): It
     were revised upwards in the year 2005 and 2006                    applies ‘if the asset has been sold after
     while it was reduced for certain segments in 2012                 36 months of owning it’. In this case the
     and 2013. The STT provisions were altered in                      ‘rate’ of this tax is 20 per cent. In cases
     the year 2008 such that for professional traders                  of shares, mutual funds, units of the
     (brokers), STT came to be treated as an expense                   UTI and ‘zero coupon bond’ there was