STT: Securities Transaction Tax

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Sakshi Shah

Business and Profession Income
Income Tax Rates
Trading Income
Last updated on February 12th, 2024

When STT was not introduced, people were used to evade tax by not declaring the trading transactions. Hence, in 2004, the Finance Act introduced the Securities Transaction Tax (STT). The main purpose of such tax is to prevent tax evasion on capital gains obtained from stock sales. Further, this tax ensures a fair and transparent collection of taxes from financial market transactions.

What is STT?

The Securities Transaction Tax (STT) is imposed on the buying and selling of securities traded on recognized stock exchanges in India. The Securities Transaction Act specifies the types of securities subject to this tax, which includes equity, derivatives, and units of equity mutual funds. Moreover, it also applies to unlisted shares which are initially offered to the public in an IPO and subsequently listed on a recognized stock exchange. Further, the tax rates are decided by the government, and it is payable by both the purchaser and the seller.

The following persons are liable to collect STT:

Responsible persons must deposit the STT collected with the central government by the 7th of the following month. However, if they fail to collect the tax, they still have to deposit the equivalent amount with the central government within the due date. Additionally, failure to collect or remit taxes will result in interest and penalties.

Securities on which STT is levied

Securities Transaction Tax is charged on the Securities that are traded on a recognized stock exchange in India. Hence, this tax does not apply to off-market transactions. Following is the list of securities on which it is levied:

Securities Transaction Tax Rates

TransactionSTT ratePayerValue on which STT to be paid
Purchase of equity share (delivery-based) or
Unit of business trust
0.1%BuyerPurchase Value
Sale of equity share (delivery-based) or
Unit of business trust
0.1%SellerSales Value
Purchase of equity mutual fund (delivery-based)NILBuyerNot Applicable
Sale of equity mutual fund (delivery-based)0.001%SellerSales Value
Sale of equity shares (intraday) or
Equity mutual fund (without actual delivery)
0.025%SellerSales Value
Sale of Exchange Traded Funds (ETFs)0.001%SellerSales Value
Sale of Futures0.0125%SellerSales Value
Sale of Options (option not exercised)0.0625%SellerOption Premium
Sale of Options (option is exercised)0.125%PurchaserSettlement Price
Sale of unlisted equity shares or units of business trust under an IPO which are later listed on a recognized stock exchange0.2%SellerSales 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.

Tax on Capital Gains

Type of SecurityPeriod of HoldingSTCGLTCG
Equity shares
Equity Mutual Funds
Exchange Trade Funds
12 Months15%Upto 1 lakh – Nil
Above 1 lakh – 10%
Foreign Shares24 MonthsSlab Rates10% without indexation

In the case of Equity Shares and Equity MF, the investor should calculate the cost of acquisition after applying the grandfathering rule to calculate the Long Term Capital Gain on shares.

Tax on Business Income

A trader having income from trading in securities and reporting such income as Business Income can claim securities transaction tax as a valid business expense. The securities transaction tax 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.


Case 1: The trader buys 100 shares of HDFC at INR 1000 each and sells them on the same day at INT 1006. Hence, this transaction will be treated as an Intraday transaction. Now, the applicable STT rate for intraday transactions is 0.025%. Therefore STT will be INR 1006*100*0.025% = INR 25.15.

Case 2: The trader sells 1 lot of NIFTY at INR 9000. Therefore, the total value of the transaction will be INR 6,75,000 (INR 9000*75). The STT rate applicable for future transactions is 0.0125%.
Hence. STT = INR 6,75,000*0.0125% = INR 84.375


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.

Can I claim STT as an expense?

Yes, STT can be claimed as a business expense while filing ITR if securities transactions are reflected as business income.

Who is liable to pay STT?

STT is levied at the time of purchase as well as sales. Hence, the seller and buyer both have to pay STT while trading from the recognized stock exchange.

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