The Shocking Truth Behind the Hidden Tax That's Eating Away at Your Stock Market Gains: 5 Crucial Things to Know

The stock market can be a thrilling yet overwhelming place for investors, with its unpredictability and volatility. But amidst the uncertainty, one aspect that remains constant is the tax that investors have to pay on their transactions. Recently, we shed light on the 5 key things to know when it comes to tax implications for listed equity shares.

One crucial detail that emerged was the Securities Transaction Tax (STT), a direct tax levied on every purchase and sale of securities listed on a recognized stock exchange. This tax is most likely to be in the form of a small percentage of the total transaction value.

However, we picked one key area of interest - equity intraday transactions - which carries a significant weightage among active traders who thrive in the dynamic day-trading space. And here's the most fascinating part - a low but nonetheless significant Securities Transaction Tax of 0.025% is applicable on the sell side for equity intraday transactions.

So, let's understand how this works. Intraday trading revolves around buying and selling within the same trading session, with no overnight positions being taken. Equity intraday transactions usually attract the STT because they involve buying and selling of securities on the same trading day.

In such scenarios, investors must keep this STT rate of 0.025% on equity intraday transactions in mind to gauge the costs associated with buying and selling shares on the same day. These expenses pile up in addition to other costs like brokerage, charges and fees, and eventually have a bearing on an investor's overall profit-and-loss account.

Breaking down the STT numbers, we find out that the Securities Transaction Tax of 0.025% on the sell side translates to Rs. 25 as tax on a sell side turnover of Rs. 1 lakh. A deeper look into these numbers throws more light on why all tax implications, like the STT, are essential for a comprehensive investment strategy.

A trader that carries out intraday trading with Rs. 1 lakh would not only be exposed to market risks, but also would lose a portion of their profit to pay the mandatory STT.