Securities Transaction Tax - STT

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Sakshi Shah

Business and Profession Income
Income Tax Rates
STT
Trading Income

STT i.e. Securities Transaction Tax is levied on the purchase and sale of securities listed on a recognized stock exchange in India. The STT Act has a list of securities on which STT is applicable. Such securities include equity, derivatives, and units of equity mutual fund. The STT rate is prescribed by the Government. STT should be paid by buyer or seller.

If the recognized stock exchange is unable to collect STT from the trader, it is still liable to deposit STT with the government to avoid interest and penalty.

Securities on which STT is levied

Securities Transaction Tax is charged on the Securities that are traded on a recognized stock exchange in India. Following is the list of securities on which STT is levied.

Securities Transaction Tax Rates

Transaction STT Rate Who pays? Value
Purchase of equity share (delivery based) or unit of business trust 0.1% Buyer Purchase Value
Sale of equity share (delivery based) or unit of business trust 0.1% Seller Sale Value
Purchase of equity mutual fund (delivery based) NIL Buyer Not Applicable
Sale of equity mutual fund (delivery based) 0.001% Seller Sale Value
Sale of equity share (intraday) and equity mutual fund (without actual delivery) 0.025% Seller Sale Value
Sale of Exchange Traded Funds (ETFs) 0.001% Seller Sale Value
Sale of Futures 0.01% Seller Sale Value
Sale of Options (option not exercised) 0.017% Seller Option Premium
Sale of Options (option is exercised) 0.125% Buyer Settlement Price
Sale of unlisted equity shares under an IPO which are later listed on a recognized stock exchange 0.2% Seller Sale Value

Income Tax on Securities with STT paid

The income tax rate for securities on which STT is paid is lower than the income tax rate for other assets. Here are the Income Tax rates for securities on which STT is paid.

Type of Security Period of Holding LTCG STCG
Equity Shares / Equity MF / ETF / ESOP / RSU 12 months 10% in excess of INR 1 lac 15%
Foreign Shares 24 months 10% without indexation slab rate

In the case of Equity Shares and Equity MF, the investor should calculate the cost of acquisition after applying the grandfathering rule. Read about how to calculate income tax on LTCG on sale of equity shares and equity mutual funds.

LTCG Tax on Shares - Equity Shares & Equity Mutual Funds
LTCG tax on sale of equity shares and mutual funds which was earlier exempt under Sec 10(38) is now taxable at 10% in excess of Rs. 1 lac under Sec 112A
Read More
LTCG Tax on Shares - Equity Shares & Equity Mutual Funds
LTCG tax on sale of equity shares and mutual funds which was earlier exempt under Sec 10(38) is now taxable at 10% in excess of Rs. 1 lac under Sec 112A
Read More

A trader having income from trading in securities and report such income as Business Income can claim STT as a valid business expense. STT paid on trading transactions is a direct expense related to trading income. The trader can report it as an expense in the P&L Account while filing ITR-3 on the Income Tax Website.

FAQs

How is STT charged on Intraday Trading?

STT is charged on the sell value of the transaction at 0.025%. Here is an example:
Trader buys 100 shares of HDFC at Rs.1000 each at 11:30 AM on Monday & sells them off at Rs.1006 at 2:00 PM. STT will be Rs.25.13 calculated as Rs.1006*100*0.025% = Rs.25.15

How is STT charged on F&O Trading?

STT is charged on the sell value of the transaction at 0.01%. Here is an example:
A trader sells 1 lot of NIFTY on at 9000. His total volume comes to Rs.9000*75 = Rs.6,75,000. STT on this trade will be calculated as Rs.6,75,000*0.01% = Rs.67.5

How is STT different from CTT?

STT is Securities Transaction Tax and CTT is Commodity Transaction Tax. STT is levied on trading in securities such as equity delivery, equity intraday, equity F&O, ETFs, Mutual Funds etc. CTT is levied on trading in non-agri commodity derivatives.

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