Calculating STT

I would like to know whether the Securities Transaction Tax (STT) is deductible when calculating short-term capital gains? I invested Rs 80,000 in an equity scheme on January 1, 2007 and redeemed Rs 1,00,250 on March 28, 2007. Out of this, I received Rs 1,00,000 as Rs 250 was deducted on account of STT. Does the short term gain calculated for the purpose of tax amount to Rs 20,000 or Rs 20,250?
-Anonymous

The capital gain is calculated on the sales proceeds received, which is Rs 1,00,000 in your case (i.e., after deducting securities transaction tax). Therefore, short-term capital gains will be Rs 20,000 and you will have to pay a short-term capital gains tax at the rate of 10 per cent (plus cess and surcharge) on this amount.

This article was originally published on October 09, 2007.