## Securities Transaction Tax (STT) & Commodities Transaction Tax (CTT)

STT is levied on transactions in listed securities (shares, units); CTT on commodity derivatives.

### Deduction Rule

STT (Sec. 36(1)(xv)) and CTT (Sec. 36(1)(xvi)) are allowed as a business deduction only if:

> The shares / units / commodities are held as Stock-in-Trade (i.e., the assessee is in the business of trading in them).

### What if held as Investment?

If the securities/commodities are held as capital assets, then STT/CTT is not deductible under PGBP.
However, when computing short-term capital gains under section 111A or long-term capital gains under section 112A, STT paid on purchase/sale is NOT deductible from sale consideration (different rule under Capital Gains head).

Worked example

### Example 1

Example: Mr. X, a stock broker, holds shares as stock-in-trade. During P.Y. 25-26, he pays STT of ₹2,50,000 on share transactions.

→ STT of ₹2,50,000 is deductible under PGBP u/s 36(1)(xv).

Contrast: Mr. Y holds shares as investment (capital asset) and pays STT of ₹2,50,000 on his trades.

→ STT is not deductible under PGBP. It also cannot be reduced from capital gains.

⚠️ Common exam mistakes

Claiming STT/CTT as deduction when the assessee holds the assets as investments (capital assets).
Deducting STT from sale consideration while computing capital gains — STT is specifically not allowed as a cost/expense under Capital Gains head.

Bare-Act text Section 36(1)(xv) and 36(1)(xvi) · Income-tax Act, 1961 · click to expand

Section 36(1)(xv): An amount equal to the securities transaction tax paid by the assessee in respect of the taxable securities transactions entered into in the course of his business during the previous year, if the income arising from such taxable securities transactions is included in the income computed under the head 'Profits and gains of business or profession'.

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STT and CTT [Sec. 36(1)(xv) and 36(1)(xvi)]

Worked example

⚠️ Common exam mistakes