Income Tax Department Directs Brokers to Deposit Excess STT Collected from Clients

The Income Tax (I-T) Department has asked stock brokers to deposit any excess securities transaction tax (STT) collected from clients for the financial year 2023–24 and earlier years if the amount has not been transferred to the government, as per The Business Standard report. 

Authorities Raise Concern Over STT Remittance 

As per the report, the direction was conveyed to the National Stock Exchange (NSE) through a letter dated 5 March. The exchange later issued a circular informing brokers about the communication and asking them to review their records. 

According to the letter, certain brokers and sub-brokers had collected STT beyond the applicable amount from investors but had not deposited the excess with the government account. 

NSE Asks Brokers to Submit Details 

Following the communication from the tax authorities, the NSE has asked trading members to provide details of the excess STT collected from clients and retained by them. 

The exchange has requested brokers to report such instances at the earliest so that the amounts can be reconciled and transferred to the appropriate account. 

A 7-Day Window for Payment 

The circular states that brokers must deposit the excess STT with the exchange within 7 days of identification. Interest will apply where the amount has been retained without remittance. 

Interest has been fixed at 1% per month for the period of delay. After receiving the funds from brokers, the NSE will remit the amount to the government. 

Role of STT in Market Transactions 

STT is a direct tax charged on the purchase and sale of securities and derivatives traded on recognised stock exchanges. The levy applies to transactions regardless of whether they result in gains or losses. 

The tax is collected by brokers on behalf of the government at the time of executing trades and later transferred to the government account. 

Collections and Rate Changes 

Data shows that STT collections stood at ₹52,197 crore in FY24. The government has projected collections of about ₹73,700 crore by FY27. For FY26, the earlier estimate of ₹78,000 crore has been revised to ₹63,670 crore. 

The Finance Minister has also announced changes to STT rates on futures and options (F&O) transactions from 1 April.  

The rate on futures will rise from 0.02% to 0.05% of the traded value. The tax on option premiums will increase from 0.1% to 0.15%, while the levy on exercising options will move from 0.125% to 0.15% of the intrinsic value. 

Read More: Income Tax Dept's SAKSHAM NUDGE Campaign Prompts Restaurants to Update ITR before March 31! 

Conclusion 

The directive requires brokers to identify and transfer any excess STT collected from clients, along with applicable interest. The step follows communication from tax authorities regarding unremitted amounts from previous years. 

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