In the last session, we started our journey f

or the course…

Prof. C. P. Gupta
Adjunct Professor
IIM, Jammu
 OBJECTIVE OF THE COURSE

To equip the participants with the necessary

knowledge & skill to make intelligent investment
decisions by using the Modern Portfolio Theory and
the latest thinking that is emerging in the area of
Investment Analysis and Portfolio Management.
We started with
some basics!!!!!!!
 What is
investment?

Issue # 1
 Why should we
investment?

Issue # 2
 Where should
we investment?

Issue # 3
 Real Assets
Vs.
Financial Assets
We should investment in a financial asset…

 We shall restrict ourselves to TWO KINDS

of financial assets –

 FIXED INCOME SECURITY – BOND

 VARIABLE INCOME SECURITY - EQUITY

 What is a
framework for
evaluating an
Issue # 4
investment?
We use two-parameter framework
to evaluate an investment …

 One parameter is - RETURN; and

 Another parameter is - RISK.

RETURN...
 What is return …….?

 How do we estimate it for a security?

 Should we take it before tax or after tax?

 What is the difference between interest and

return?

RETURN vs YIELD

SIMPLE RATE OF RETURN AND CONTINUOUS

COMPOUNDING RATE OF RETURN
 RISK

 What is risk?

 Why risk?

 How is it different from uncertainty?

Types of Risk:
 Systematic Risk
 Unsystematic Risk
 Market Risk
 Interest Rate Risk
 Purchasing Power Risk or Inflation Risk
 Foreign Exchange Risk
 Business Risk - Operating Leverage
 Financial Risk - Financial Leverage
 Management Risk
 Industry Risk
 Economy/Country Risk
 Credit Risk/Default Risk
 Risk is usually measured as ...
 PROBABILITY OF LOSS

 EXPECTED LOSS

 VARIATIONS & FLUCTUATIONS:

 Range
 Mean Absolute Deviation
 Standard Deviation/Variance/Coefficient of Variation
 Semi-Variance
 Variance from a benchmark - TRACKING ERROR

 COVARIANCE as a measure of risk

 the SENSITIVITY OF RETURN TO POSSIBLE CHANGES - percentage

changes.
Is there any relation between
Return and Risk?
Relation between Return and Risk
 Can we say that a person who has taken high risk will
get higher return?

 Should a person go for higher risk if he/she has to

earn higher return?

 Should a person be compensated by higher return for

taking higher risk?

 Is it HIGH RISK HIGH RETURN? Or, Is it HIGH

RETURN HIGH RISK?

 PESO PROBLEM: A situation in which what appear to be

abnormally high returns on an investment are in fact
compensation for bearing the risk of an event that has not yet
taken place.
 Where should
one
investment?
Issue#5
 Where should
one
Issue # 5 investment?
One should invest in Financial Markets!

• Primary Market – Market for IPOs and FPOs

• Secondary Market – Stock Exchanges

Why financial markets …???

Think why do financial

markets exist???
Why financial markets …???
 Inducement to save.

 Mobilization of saving.

 Lower transaction costs.

 Liquefying of securities.

 Pricing.

 Discounting the future.

 Allocation of Funds.

 Diversification of Risk.
 What process
is involved
Issue # 6 in investment?
 INVESTMENT PROCESS...
Define
Objectives of Specify the
Investment
Constraints
Programme

MONITOR THE
Look for Appropriate
Investment DECISION
Opportunities

Evaluate the
Investment Options in
Risk-Return Framework

TAKE A DECISION IMPLEMENT THE

DECISION
 When we try to manage
our investment, what
are the steps one
should follow while
Issue # 7
managing INVESTMENT?
INVESTMENT MANAGEMENT ….????

 It is ...

PLAN

IMPLEMENT

MONITOR
Now, let’s move ahead with an imp
ortant challenge – understand the
market.
Now, let’s move ahead with an important challenge –
understand the market.

Understanding
the pulse of
the Indian
stock markets
Can you understand what’s happening in stock
market by looking at the following graph?
Can you understand what’s happening in stock market
by looking at the following graph?
Stock Market Indices help us in
understanding what is happening in a
stock market.
Two Important Indices: SENSEX & NIFTY
 Stock Market performance is quantified by calculating
an index using the benchmark scrip’s.

 There are two important and widely used indices in

India are –

 S&P CNX NIFTY is associated with National Stock Exchange

 SENSEX (Sensitive Index) is associated with Bombay Stock

Exchange and
S&P CNX Nifty…
 S&P CNX Nifty
• The S&P CNX Nifty, also called the Nifty 50 or simply the Nifty, is
a stock market index and benchmark index for Indian equity market.
Nifty is owned and managed by India Index Services and Products
Ltd. (IISL), which is a joint venture between NSE and CRISIL (Credit
Rating and Information Services of India Ltd).

• S&P CNX Nifty has shaped up as the largest single financial product in
India, with an ecosystem comprising: exchange traded funds (onshore
and offshore), exchange-traded futures and options.
S&P CNX Nifty

 The S&P CNX Nifty covers 22 sectors of the Indian economy and
offers investment managers exposure to the Indian market in one
portfolio.

 The S&P CNX Nifty stocks represents about 67.27% of the free float
market capitalization of the stocks listed at National Stock
Exchange (NSE).

 Its free-float market capitalization is Rs. 3,72,16,443.47 crores by the

end of December, 2022.
S&P CNX Nifty

 The S&P CNX Nifty index is a free float market capitalisation

weighted index. The index was initially calculated on full market
capitalisation methodology. From June 26, 2009, the computation was
changed to free float methodology.

 The base period for the S&P CNX Nifty index is November 3, 1995,
which marked the completion of one year of operations of NSE's
Capital Market Segment. The base value of the index has been set at
1000, and a base capital of Rs 2.06 trillion.
 Company Name Industry Company Name Industry

Adani Enterprises Ltd. Metals & Mining ITC Ltd. Fast Moving Consumer Goods

Adani Ports and Special Economic Zone Ltd. Services IndusInd Bank Ltd. Financial Services

Apollo Hospitals Enterprise Ltd. Healthcare Infosys Ltd. Information Technology

S&P CNX Asian Paints Ltd.

Axis Bank Ltd.

Consumer Durables

Financial Services
JSW Steel Ltd.

Kotak Mahindra Bank Ltd.

Metals & Mining

Financial Services

Nifty Bajaj Auto Ltd. Automobile and Auto Components Larsen & Toubro Ltd. Construction

Bajaj Finance Ltd. Financial Services Mahindra & Mahindra Ltd. Automobile and Auto Components

companies Bajaj Finserv Ltd. Financial Services Maruti Suzuki India Ltd. Automobile and Auto Components

Bharat Petroleum Corporation Ltd. Oil Gas & Consumable Fuels NTPC Ltd. Power

Bharti Airtel Ltd. Telecommunication Nestle India Ltd. Fast Moving Consumer Goods

Britannia Industries Ltd. Fast Moving Consumer Goods Oil & Natural Gas Corporation Ltd. Oil Gas & Consumable Fuels

Cipla Ltd. Healthcare Power Grid Corporation of India Ltd. Power

Coal India Ltd. Oil Gas & Consumable Fuels Reliance Industries Ltd. Oil Gas & Consumable Fuels

Divi's Laboratories Ltd. Healthcare SBI Life Insurance Company Ltd. Financial Services

Dr. Reddy's Laboratories Ltd. Healthcare State Bank of India Financial Services

Eicher Motors Ltd. Automobile and Auto Components Sun Pharmaceutical Industries Ltd. Healthcare

Grasim Industries Ltd. Construction Materials Tata Consultancy Services Ltd. Information Technology

HCL Technologies Ltd. Information Technology Tata Consumer Products Ltd. Fast Moving Consumer Goods

HDFC Bank Ltd. Financial Services Tata Motors Ltd. Automobile and Auto Components

HDFC Life Insurance Company Ltd. Financial Services Tata Steel Ltd. Metals & Mining

Hero MotoCorp Ltd. Automobile and Auto Components Tech Mahindra Ltd. Information Technology

Hindalco Industries Ltd. Metals & Mining Titan Company Ltd. Consumer Durables

Hindustan Unilever Ltd. Fast Moving Consumer Goods UPL Ltd. Chemicals

Housing Development Finance Corporation Ltd. Financial Services UltraTech Cement Ltd. Construction Materials

ICICI Bank Ltd. Financial Services Wipro Ltd. Information Technology

 SECTORWISE COMPOSITION OF NSE NIFTY
Sector No. of Companies Weightage in Nifty

Automobile and Auto Components 6 5.28

Chemicals 1 0.48

Construction 1 3.15

Construction Materials 2 1.81

Consumer Durables 2 3.09

Fast Moving Consumer Goods 5 8.59

Financial Services 11 37.7

Healthcare 5 3.84

Information Technology 5 13.96

Metals & Mining 4 4.22

Oil, Gas & Consumable Fuels 4 12.69

Power 2 1.9

Services 1 0.77

Telecommunication 1 2.52

Total 50 100
 Category/Index-NSE
NIFTY 50
NIFTY NEXT 50
NIFTY 100
NIFTY 200
NIFTY 500
NIFTY MIDCAP 50
NIFTY MID100 FREE
NIFTY SML100 FREE
INDIA VIX
List of NIFTY BANK
NIFTY AUTO
Indices of NIFTY FIN SERVICE
NIFTY FMCG
NSE NIFTY IT
NIFTY MEDIA
NIFTY METAL
NIFTY PHARMA
NIFTY PSU BANK
NIFTY PVT BANK
NIFTY REALTY
NIFTY DIV OPPS 50
NIFTY GROWSECT 15
NIFTY QUALITY 30
NIFTY50 VALUE 20
NIFTY50 TR 2X LEV
NIFTY50 PR 2X LEV
NIFTY50 TR 1X INV
NIFTY50 PR 1X INV
NIFTY50 DIV POINT
NIFTY COMMODITIES
NIFTY CONSUMPTION
NIFTY CPSE
NIFTY ENERGY
NIFTY INFRA
NIFTY100 LIQ 15
NIFTY MID LIQ 15
NIFTY MNC
NIFTY PSE
NIFTY SERV SECTOR
NIFTY GS 8 13YR
NIFTY GS 10YR
NIFTY GS 10YR CLN
NIFTY GS 4 8YR
NIFTY GS 11 15YR
NIFTY GS 15YRPLUS
NIFTY GS COMPOSITE
BSE SENSEX…
 BSE SENSEX…
• SENSEX is calculated using the "Free-float Market Capitalization"
methodology, wherein, the level of index at any point of time reflects
the free-float market

• It reflects value of 30 component stocks relative to a base period.

• The market capitalization of a company is determined by multiplying

the price of its stock by the number of shares issued by the company.

• This market capitalization is further multiplied by the free-float factor

to determine the free-float market capitalization.

• The base period of SENSEX is 1978-79 and the base value is 100
index points. ( notation 1978-79=100). The SENSEX has given a rate
of return about 14% p.a.
BSE SENSEX companies
COMPANY
Adani Ports and Special Economic Zone
Asian Paints Ltd
Axis Bank Ltd
Bajaj Auto Ltd
Bharti Airtel Ltd
Coal India Ltd
HDFC Bank Ltd
Hero MotoCorp Ltd
Hindustan Unilever Ltd
Housing Development Finance Corp
ICICI Bank Ltd
IndusInd Bank Ltd
Infosys Ltd
ITC Ltd
Kotak Mahindra Bank Ltd
Larsen & Toubro Ltd
Mahindra & Mahindra Ltd
Maruti Suzuki India Ltd
NTPC Ltd
Oil & Natural Gas Corp Ltd
Power Grid Corp of India Ltd
Reliance Industries Ltd
State Bank of India
Sun Pharmaceutical Industries Ltd
Tata Consultancy Services Ltd
Tata Motors Ltd
Tata Motors Ltd DVR
Tata Steel Ltd
Vedanta Ltd
Wipro Ltd
Yes Bank Ltd
 Category/Index
S&P BSE Consumer Discretionary Goods & Services
S&P BSE Basic Materials
S&P BSE LargeCap
S&P BSE AllCap
S&P BSE MidCap Select Index
S&P BSE SmallCap Select Index
List of S&P BSE GREENEX
S&P BSE CARBONEX
Indices of S&P BSE IPO
BSE S&P BSE SME IPO
S&P BSE DOLLEX 30
S&P BSE DOLLEX 100
S&P BSE DOLLEX 200
S&P BSE REALTY
S&P BSE METAL
S&P BSE India Infrastructure Index
S&P BSE Healthcare
S&P BSE AUTO
S&P BSE POWER
S&P BSE OIL & GAS
S&P BSE BANKEX
S&P BSE PSU
S&P BSE Information Technology
S&P BSE CONSUMER DURABLES
S&P BSE CAPITAL GOODS
S&P BSE TECK
S&P BSE Fast Moving Consumer Goods
S&P BSE REALVOL-1MTH
S&P BSE REALVOL-2MTH
S&P BSE REALVOL-3MTH
Stock Market gives us different information and
we must understand the same.

Trailing Twelve
Months
Timings of the Market …

 The Market Opens at: 09:15 hours and Closes

at: 15:30 hours

 Pre-open trade session will be from 09:00 ~ 0

9:15 hours
 Determination of Opening Price …
 The opening price of a stock in an exchange is determined by pre-open session.

 The pre-open session is for a duration of 15 minutes i.e. from 9:00 am to 9:15
am.
 9:00 AM to 9:08 AM:

 This is the order entry session.

 One can place an order to buy and sell stocks in this duration.

 One can also modify or cancel his orders during this period.
 9:08 AM to 9:12 AM:

 This session is used for order matching and for calculating the opening price of
the normal session.

 One cannot modify or cancel buy/sell order during this time.

 9:12 AM to 9:15 AM:

 This session is used as a buffer period.

 It is used for the smooth translation of pre-opening session to the normal session.
Determination of Opening Price…
 The opening price of a stock in an exchange is
determined by pre-open session.

 The pre-open session is for a duration of 15 minutes i.e.

from 9:00 am to 9:15 am. The pre-open session is
comprised of Order collection period and order matching
period.

 Order matching period starts immediately after

completion of order collection period. Orders are
matched at a single (equilibrium) price which will be
open price.
Determination of Closing Price …

 The closing price of a scrip is computed by the Exchange on

the basis of weighted average price of all trades executed
during the last 30 minutes of the continuous trading session.

 If there is no trade recorded during the last 30 minutes, then

the last traded price of a scrip in the continuous trading
session is taken as the official closing price.

 The time between 3:30 PM to 3:40 PM is used for closing

price calculation.
Please appreciate the
difference between Last
Traded Price and Closing
Price.
Now, let’s take another important
concept related to Stock Market

Stock Market
Liquidity
Measures of Stock Market Liquidity…
Volume
• It may be measured in terms of number of shares traded or the value of total shares traded in a
stock market. Higher the volume, higher the liquidity of the shares of a company.

Turnover Ratio
• It is calculated by dividing the total number of shares traded over a period by the average number of
shares outstanding for the period. The higher the share turnover, the more liquid company shares
are.

Bid-Ask Spread
• It is the amount by which the ask price exceeds the bid price for a share in the market. The bid-ask
spread is essentially the difference between the highest price that a buyer is willing to pay and the
lowest price that a seller is willing to accept. Higher the spread, lower is the liquidity.

Impact Cost
• It is defined as the cost of executing a transaction in a given stock, for a specific
predefined order size, at any given point of time. Market Liquidity and impact cost are
negatively related.
Impact Cost of Some Shares – BSE – Jan 2023
COMPANY Mean Impact Cost (%)
Housing Development Finance Corp.Lt 0.01
Bajaj Finance Limited 0.01
HDFC Bank Ltd. 0.01
Kotak Mahindra Bank Ltd. 0.01
Reliance Industries Ltd 0.01
Mahindra & Mahindra Ltd. 0.01
Hindustan Unilever Ltd. 0.01
Asian Paints Ltd. 0.01
Purple Entertainment Limited 12.04
Market Creators Ltd. 12.33
GCM Commodity & Derivatives Limited 12.68
Kuberan Global Edu Solutions Limited 12.77
Nippon India Mutual Fund 13.46
Alacrity Securities Limited 13.69
Diksat Transworld Limited 15.46
Nippon India Equity Hybrid Mutual Fund 21.98
What NEXT?
Next Time

Thank you
very much.
A drastic change in Income Tax
in the Union Budget - 2020
Budget – 2020/2023 gives an option regarding
the adoption of tax regime – NEW or EXISTING

• Under the new tax regime (which is optional), a tax payer may opt
for the following tax slabs and forgo certain exemptions.

• New income tax regime tax slabs(available for those who forgo
exemptions) from FY 2023-24.

• Upto AY 2023-24, the old tax regime is by default, but from AY

2024-25, the new income tax regime will be the default.
Please note that those who are not opting for the new
tax regime, they are eligible for a number of deductions
and exemptions. (Only related to investments )

What are those, that we are going to study.

 Discussion on Taxation is structured as …

• Tax provisions regarding…

– Principal Amount
– Coupon Income
– Capital Gains
Tax provisions regarding the
principal amount invested
Let’s appreciate difference between
– DEDUCTIONS & EXEMPTIONS
First, we shall discuss DEDUCTIONS
Tax provisions regarding Principal Amount…
• Under Section 80C deduction upto Rs 1,50,000 to
individuals and HUF for specified savings viz. life
insurance premia, contributions to provident fund,
purchase of infrastructure bonds, repayment of
housing loans, tuition fee, some specific fixed
deposits with banks, etc.

• This section provides for a number of additional

deductions like investment in mutual funds, senior
citizens saving schemes, purchase of NABARD bonds,
etc.
Tax provisions regarding Principal Amount…(continued)
• Section 80 CCC: Tax deductions on investment in pension
funds. These pension funds could be from any insurer and a
maximum deduction of Rs 1.5 lakh can be claimed under it.
This deduction can be claimed only by individual taxpayers.

• Section 80 CCD: Contributions made by an individual and

his/her employer towards pension schemes notified by the
Central Government, both are eligible for tax deduction,
subject to the deduction being less than 10% of the salary of
the person. Only individual taxpayers are eligible for this
deduction.
(At present, NPS (National pension scheme is notified.)
Tax provisions regarding Principal Amount…(continued)
• Overall cap of Rs. 1,50,000 in respect of deductions
under section 80C, 80CCC (annuity plan) and 80CCD
(pension plan for Government employees).

• Finance Minister Arun Jaitley in Budget 2015-16

introduced an additional income tax deduction
of Rs. 50,000 for contribution to the National Pension
Scheme (NPS) under Section 80CCD. Thus, the total
exemption amounts to Rs. 2,00,000.
Something more about NPS and its taxability
Please note that these deductions are not
available under the NEW tax option.
Tax provisions regarding the
Coupon/interest amount -
EXEMPTIONS
Related to Interest/Coupon ...
• As a general rule, interest/dividend incomes are taxable like other incomes.
However, interest or capital gains earned on securities/schemes like the
following is exempted from tax: [Sec 10]
– RBI Bonds;
– Government Relief Bonds;
– Post Office Cash Certificates; Post Office Saving Bank Accounts ( interest
from Post Office Savings Bank Account was not to be computed as income but
now, the exemption to interest up to Rs. 3500/- for individual account and Rs.
7000 in the case of joint account.)

– Public Provident Fund and Statutory provident fund or any income

received on behalf of Recognized Provident Fund, approved
superannuation fund, approved gratuity fund etc. ;
– Any sum received on life insurance policy, including any sum received
as bonus.
Related to Interest/Coupon ...(continued)
• As a general rule, interest/dividend incomes are taxable like
other incomes. However, interest or capital gains earned on
securities/schemes like the following is exempted from tax: [Sec
10]
– Interest on Gold Deposits
– Interest on Capital Investment Bonds as notified by the Central
Government
– Interest on bonds issued by a local authority and specified by the
Central Government by notification in the Official Gazette.
– Dividend Income on shares from domestic companies
– Dividend/other income received from mutual funds
– income received in respect of units from UTI
 Dividend Stripping…Sec 94(7)
a) Any person buys or acquires any security or unit within a period of three months
prior to record date;

b) (i) Such person sells or transfer such securities with in a period of three
months after such date or
(ii) Transfers such units within a period of 9 months after such record
date;

c) The dividend or income on such securities or unit received or receivable by such

person is exempted,

Then, the loss, if any, arising to him on account of such purchase and sale of securities
or unit, to the extent such loss does not exceed the amount of dividend or income
received or receivable on such securities or unit, shall be ignored for the purposes of
computing his income chargeable to tax.
Budget-2020:
• This budget abolished Dividend Distribution Tax effective from April
1, 2020.

• Dividend Income received by a shareholder or income received from

a mutual fund by a unit holder will be taxable in the hands of the
recipients and will be taxed as per the tax slab applicable to the
shareholder/unitholder.

• A TDS of 10% applies to the dividend income distribution, but no

TDS is applicable if the dividend receipt from a company or mutual
fund does not exceed Rs 5,000 annually.
Budget - 2012

• Deduction of up to Rs.10,000 interest income from

savings bank accounts from the Income under Section
80TTA.
Budget - 2018

• A new Section 80TTB is inserted to allow a deduction

up to Rs. 50,000 in respect of interest income from
deposits held by senior citizens. However, no
deduction under Section 80TTA shall be allowed for
senior citizens.

It is not allowed
under new tax system.
Budget - 2019

• Payment from the National Pension System

Trust to an employee [Section 10(12A)]
– Any payment from the National Pension System Trust to
an assessee on closure of account or his opting out of the
pension scheme referred to in section 80CCD, to the
extent it does not exceed 60 % of the total amount
payable to him at the time of closure or his opting out of
the scheme, is exempt from tax.
Taxation rules regarding the
Capital Gains/Losses
Tax provisions related to capital gains
• SHORT TERM CAPITAL GAINS: gains on transfer of capital assets
held by the assessee for not more that 12 months in case of equity
or preference shares held in a company, any other security listed in
a recognized stock exchange, zero coupon bonds and units of UTI
and other mutual funds specified or for not more than 36 months in
case of other securities.

• With effect from Assessment Year 2017-18, period of holding to be

considered as 24 months instead of 36 months in case of unlisted
shares of a company.
Tax provisions related to capital gains – Short Term
• Short term capital gain an equity share in a company,
a unit of an equity oriented fund or units of a
business trust on which the Securities Transaction Tax
is paid is subject to a tax of 15%.

• Short term capital gain on debentures, bonds and

Government securities will be clubbed with normal
income and will be taxed accordingly.
Calculation of Capital Gain…

• Securities Transaction Tax will not

be deducted in the calculation of
capital gains.
Tax provisions related to capital gains – Long Term
• LONG TERM CAPITAL GAINS: gains on transfer of capital assets
held by the assessee which is not a short-term capital asset. In
other word, if an asset is held for more than 12 months or 36
months as the case may be, such an asset will be treated as a
long-term capital asset.

• Long Term Capital Gains are subject to a flat rate of tax @20%.
The tax payable in respect of long-term capital gains from the
transfer of listed securities or units of mutual funds/UTI shall be
restricted to 10% of amount of capital gain computed without
giving the benefit of indexation.
Tax provisions related to capital gains – Long Term
• Profit arising on maturity/ redemption of Zero Coupon
Bonds to be taxed as capital gains and are treated as Long
Term Capital Gain provided held more than 12 months.

• Bonds and debentures are not subject to indexation.

Tax provisions related to capital gains – Long Term

• The Act related to Securities Transaction Tax (STT)

exempts long-term capital gains on the specified
securities, sold on or after the specified date on a
recognized stock exchange.

But from the

assessment year
2019-20, it is not
so!!!
Tax provisions related to capital gains – Long Term
(Budget - 2018)

• As per Union Budget 2018, Long-term Capital Gains (LTCG) on

the sale of listed securities exceeding more than Rs.1 lakh will be
taxed at 10% without the benefit of indexation. Fortunately,
existing investors can get relief on the exempt amount of capital
gains till 31 January 2018. However, the amount of gains made
thereafter (after 31 January 2018) will be taxed.
Budget - 2021
• Taxation about Unit-Linked Insurance Scheme
(ULIP)
– Any gains from a ULIP policy shall be treated as capital gains in
case the premium paid for any year exceeds Rs 2.5 lakhs.

– Such policies will now be taxed at 10 per cent at maturity as it

will be considered as long-term capital gains.

– The change will be enforced for all ULIP policies issued after
February 1, 2021. So, those already running their ULIP policies
with a premium of over Rs. 2.5 lakh in a year shall not be
affected.
Budget – 2021 (Another change)

• Taxation about Interest on Provident Fund

– If deposits in Employees' Provident Fund (EPF) and
Voluntary Provident Fund (VPF) by an employee exceed
Rs 2.5 lakh in a financial year, then the interest earned on
the contributions exceeding Rs 2.5 lakh will be taxable in
the hands of an employee.

– Further, in case there is no contribution by the employer

to the EPF account, then interest will be tax-exempt for
the deposits up to Rs 5 lakh in a financial year.
Time to apply your understanding…

• A person purchased treasury

bills of 91 days @ Rs.98.50 on
Oct 10, 2022. If the person has
purchased thousand (1,000)
such bonds then what will be
his tax liabilities on it? Assume
that he falls in the tax slab of
30%.
 Now, something about
Securities Transaction Tax
Securities Transaction Tax
▪ Meaning
– ‘Securities Transaction Tax’ means tax leviable on the
taxable securities transaction under the provisions of
Chapter VII of Finance (No. 2) Act, 2004
– It came into force on 1st October, 2004, by way of a
notification in the Official Gazette by Central Government
Taxable Securities Transaction
A transaction of:
• Purchase or sale of an equity share in a company or a derivative
or a unit of an equity oriented fund, entered into a recognized
stock exchange; or
• Sale of a unit of an equity oriented fund to the Mutual Fund.
 Charge of Securities Transaction Tax
Taxable Securities Transaction Rate Payable
by
Purchase of an equity share in a company or a unit of an equity oriented fund, 0.100 Purchaser
where– per
a) The transaction of such purchase is entered into a recognized stock exchange; cent
and
b) The contract for the purchase of such share or unit is settled by the actual
delivery or transfer of such share or unit
Sale of an equity share in a company or a unit of an equity oriented fund, 0.100 Seller
where– per
a) The transaction of such sale is entered into a recognized stock exchange; cent
and
b) The contract for the sale of such share or unit is settled by the actual
delivery or transfer of such share or unit
Sale of an equity share in a company or a unit of an equity oriented fund, 0.025 Seller
where– per
a) The transaction of such sale is entered into a recognized stock exchange; cent
and
b) The contract for the sale of such share or unit is settled otherwise than by
the actual delivery or transfer of such share or unit
Budget - 2021

• Security Transaction Tax on ULIPs

– Sale or surrender or redemption of a unit of an
equity oriented fund to an insurance company, on
maturity or partial withdrawal, with respect to unit
linked insurance policy issued by such insurance
company on or after the 1st day of February, 2021
will attract STT of 0.100 per cent to be paid by the Seller.
 Charge of Securities Transaction Tax
Taxable Securities Transaction Rate Payable
by

Sale of a future in securities, where the transaction of 0.010 Seller

per
such sale is entered into in a recognized stock exchange. cent

Sale of an option in securities, where option is exercised. 0.125 Purchaser

per
(Budget 2019: STT will be levied on the difference between cent
settlement and strike prices in case of exercise of options
0.017
Sale of an Option in securities per Seller
cent

Sale of unit of an equity oriented fund to the mutual fund. 0.025 Seller
per
cent
 Charge of Securities Transaction Tax

Taxable Securities Transaction Rate Payable

by

Sale of a unit of an equity oriented fund, where – 0.001 Seller

per
(a) the transaction of such sale is entered into in a cent
recognised stock exchange; and
b) the contract for the sale of such unit is settled by
the actual delivery or transfer of such unit