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Every time you buy or sell securities on Indian stock exchanges like the NSE or BSE, a small government levy called the Securities Transaction Tax (STT) is applied. While often overlooked, STT directly affects your net returns, especially for frequent traders. Introduced in 2004 to simplify tax collection from securities trading, STT is now a key component of transaction costs. This article explains what STT is, where it applies, and how it is calculated across different asset classes.
STT is a direct tax levied by the Government of India on transactions done on recognised stock exchanges. It is applicable to the purchase and sale of securities such as:
Equity shares
Equity-oriented mutual fund units
Derivatives (Futures and Options)
Equity delivery trades and intraday trades
STT is collected by the exchanges (NSE/BSE) and deposited with the government. The tax is calculated as a percentage of the transaction value and is embedded in your contract note.
The Securities Transaction Tax (STT) varies based on the type of equity trade. Here’s how it is applied:
When you buy and hold shares, STT is charged only on the buy side.
Rate: 0.1% on the transaction value
Example: Buying ₹1,00,000 worth of shares → STT = ₹100
For intraday trades (buy and sell on the same day), STT is applied only on the sell side.
Rate: 0.025% on the transaction value
Example: Selling ₹1,00,000 worth of shares → STT = ₹25
Here's how STT is structured for futures and options:
In futures contracts, STT is levied only on the sell side of the transaction.
Rate: 0.0125% on the transaction value
Example: Selling futures worth ₹5,00,000 → STT = ₹62.50
STT on options is applied only when the contract is exercised, and it is charged on the intrinsic value of the option, not the premium.
Rate: 0.125% of the settlement value (on exercise)
Example: Exercising a call option with settlement value ₹2,00,000 → STT = ₹250
If the contract is not exercised and simply squared off or expired, no STT is charged.
STT is applicable to equity-oriented mutual fund units when they are sold on the exchange.
Rate: 0.001% on the sell-side transaction
Applies to ETFs (Exchange-Traded Funds) and equity mutual funds traded on NSE/BSE
STT rates vary based on the nature of the transaction and the instrument traded. The table below provides a quick overview:
Transaction Type |
STT Rate |
Charged On |
|---|---|---|
Equity Delivery |
0.1% |
Buy side |
Equity Intraday |
0.025% |
Sell side |
Equity Futures |
0.0125% |
Sell side |
Equity Options (on exercise) |
0.125% |
Settlement value |
Equity Mutual Funds (ETFs) |
0.001% |
Sell side |
While STT may appear marginal, it has broader implications for traders and investors. Key points to keep in mind include:
STT is a tax and not a fee—you cannot reclaim it, even if you incur a trading loss.
For high-frequency traders, STT can significantly affect profitability, particularly in intraday or options trading.
STT paid on transactions is not deductible when calculating capital gains, as per current tax laws.
Your broker issues a contract note after each trade. This document itemises all transaction charges, including STT, under the government levies section.
It is good practice to regularly review your contract notes to understand the cumulative effect of STT on your trading performance.
STT is automatically collected by stock exchanges like NSE and BSE at the time of trade execution. They remit the collected tax to the government on behalf of all market participants.
Before STT, profits from stock trading were hard to track for taxation. STT provided a transparent and straightforward method for the government to tax securities transactions without relying on declarations.
STT may appear to be a small charge, but it adds up over time and affects your net return, especially for active traders. Understanding how STT is calculated for different securities and trading styles is essential for effective cost management. Whether you're a long-term investor or an intraday trader, keeping STT in mind helps you plan your trades more efficiently.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
It depends on the type of trade. For equity delivery, it is charged on the buy side, while for intraday and futures, it is charged on the sell side.
Yes. STT is charged regardless of whether the trade results in a profit or loss.
No. STT is not deductible from your capital gains or losses for income tax computation.
STT on options is only charged if the contract is exercised, and it is calculated on the intrinsic value of the option at the rate of 0.125%.
STT on futures is levied only on the sell transaction at the rate of 0.01% on the contract value.
No. STT is charged only on trades executed through a recognized stock exchange in India.
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