NSE Flags Excess STT Retention, Tells Brokers To Remit Amounts

The National Stock Exchange of India (NSE) has asked its members, including brokers and sub-brokers, to disclose any excess Securities Transaction Tax (STT) collected but not deposited with the government. The directive applies to FY24 and earlier years.

In a circular issued on 10 March, the exchange said the move follows directions from the Income Tax Department. The tax authority had identified cases in which some intermediaries collected excess STT but did not remit it to the government.

Why Has NSE Issued This Circular?

STT is levied on trades executed on recognised stock exchanges and is collected by brokers at the time of the transaction before being deposited with the government.

It plays a significant role in the Indian taxation system of capital markets. The tax is imposed on different market transactions, such as equity delivery transactions and intraday transactions, as well as derivatives contracts.

According to the circular, the Joint Commissioner of Income Tax, Range 7(1), had written to NSE on 5 March, asking the exchange to highlight the issue and obtain details from members who may have retained excess tax.

What Directions Were Issued To Brokers?

After receiving the letter from the Joint Commissioner of Income Tax, NSE has asked brokers to submit details of any excess STT collected and retained during FY24 and earlier periods.

Members have also been instructed to remit the excess amount along with interest calculated at 1% per month for the delay. The payment must first be made to the exchange, which will subsequently transfer the funds to the government account.

The exchange has requested the members to follow the directive within seven days after the issue of the circular. Any discrepancy or reimbursement delay in the payment of the tax can incur penalties and interest according to the regulations.

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What Does This Mean For Investors?

To investors, the directive mainly focuses on compliance among brokers and not traders. Nevertheless, it points out the ongoing attempts of the regulator to make the securities market more transparent and accountable in terms of tax collection.

Tighter monitoring of the intermediaries can also assist in enhancing investor confidence since tax revenues generated in the trades will be duly recorded and remitted to the government.

Sources:

Economic Times

Business Line