Share operations are presently underway impacted by a broad spectrum of people in the country. The numerous provisions regarding tax legislation must, therefore, be fully realized by them and by their tax consultants adequately so that the optimum utilization of provisions providing several inducements and relief may be achieved. Vide imposition of Securities Transaction Tax, the Union Budget 2004-05 suggested a prototype shifting in the taxation of capital gains on financial securities.
STT is an elegant, cost-effective, and easily managed tax having the real merit of substantially eliminating tax evasion. This research paper endeavors to demystify STT and provide justification and logic behind the acceptance of STT in the Indian Financial market. The author believes at the current times, no single mechanism alone can iron out problems afflicting the Indian financial markets. However, if used in parallel with other policy tools such as banning short selling and insider trading, STT does act as a useful device to tackle the numerous challenges.