When the STT was introduced in India through the Finance Act, 2004, it was hailed as a pragmatic solution to enhance compliance and traceability in securities transactions. The stated object was “to simplify tax collection, curb evasion, and streamline the taxation of capital gains”.

By levying a small tax on transactions executed on recognised stock exchanges, the STT aimed to replace the cumbersome process of tracking capital gains, particularly long-term capital gains (LTCG), which were exempted under the Income Tax Act for STT-paid transactions.

A rebate under Section 88E further ensured that the STT did not burden traders excessively, aligning with the parliamentary intent to avoid additional taxation.

Fast forward to 2025, and the landscape of Indian financial markets has transformed dramatically. Digitisation has revolutionised record-keeping, with stock exchanges, brokers, and depositories implementing robust systems for transaction tracking.

The mandatory use of PAN, KYC compliance, and dematerialised securities, coupled with Annual Information Returns (AIR) filed by exchanges and brokers, have virtually eliminated concerns about traceability. Every trade is now electronically recorded,........

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