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Microlesson · 5-min read

Transfer Expenses & Securities Transaction Tax

## Transfer Expenses

Expenses incurred by the assessee wholly and exclusively in connection with the transfer of the capital asset are deductible from FVOC.

### Typical Allowable Transfer Expenses

  • Brokerage / commission paid to broker on sale
  • Legal fees, stamp paper, registration charges paid by seller
  • Advertisement expenses for the sale
  • Travelling expenses for completing the sale

### Key Disallowance — Securities Transaction Tax (STT)

STT is NOT deductible as a transfer expense — neither against business income nor against capital gains. This is a specific statutory bar.

### Why STT is disallowed

Since LTCG on listed equity (Section 112A) is taxed at a concessional rate, the legislature has expressly disallowed STT as a deduction so that the same expense is not benefited twice.

Worked example

### Example 1

Example: Sale of listed shares: Sale Price ₹5,00,000. Brokerage ₹5,000. STT ₹500.

ParticularsAmount (₹)
Sale Consideration5,00,000
(-) Brokerage (Transfer expense)(5,000)
(-) STTNOT allowed
Net Sale Consideration4,95,000

⚠️ Common exam mistakes

  • Deducting STT from sale consideration — STT is specifically barred.
  • Allowing pre-acquisition expenses (e.g., brokerage on purchase) as transfer expense — those go into COA, not transfer expense.
  • Allowing expenses borne by the buyer (e.g., buyer's stamp duty) — only seller's expenses qualify.
Reference: Section 48
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