Archive · 25 Aug 2026
Brokerage May Reduce Capital Gains, but STT Cannot
When you sell an investment, the taxable profit is not always just the sale price minus the purchase price.
Some selling expenses can be taken away before calculating the profit.
Brokerage paid for selling the investment may usually qualify as such an expense.
Securities Transaction Tax, or STT, cannot be deducted.
Even though brokerage and STT may appear on the same transaction statement, tax rules treat them differently.
Interest on money borrowed to buy an investment is a separate issue.
It cannot automatically be added to selling expenses.
Investors should check the rules carefully so they do not claim the same tax benefit twice.
Brokerage paid wholly and exclusively for transferring a capital asset can generally reduce taxable capital gains.
Securities Transaction Tax is specifically excluded and cannot be deducted from capital gains.
Brokerage and STT may appear together on transaction statements but receive different tax treatment.
Interest on a loan used to acquire an investment is not automatically a transfer expense.
Taxpayers should review loan interest separately to determine whether another deduction applies and avoid double benefits.
- Who
- Investors and taxpayers, with guidance from Nishant Shanker of Navraj Global Advisors.
- What
- The article explains how brokerage, STT, and loan interest are treated when calculating capital gains.
- When
- When an investment is sold and capital gains are calculated.
- Where
- Under the provisions discussed in the Income-tax Act, 2025.
- Why
- To calculate taxable gains correctly and avoid improper or duplicate deductions.
- Brokerage
- Generally deductible when incurred wholly and exclusively in connection with transferring a capital asset.
- Securities Transaction Tax
- Specifically excluded and cannot be deducted from capital gains.
- Loan interest
- Not automatically treated as a transfer expense.
- Relevant provision
- The article identifies Section 72 of the Income-tax Act, 2025.
- Double benefit concern
- Taxpayers should check whether claiming loan-interest relief elsewhere would create a duplicate tax benefit.
- Key consideration
- The nature and purpose of the loan, investment, and use of funds may affect interest treatment.