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.
- The recognized stock exchange collects STT from the buyer or seller
- The recognized stock exchange deposits STT with the government on or before the 7th of the next month
- Buyer or Seller can claim STT as a business expense against trading income
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.
- Equity Shares, Bonds, Debentures, Stocks
- Units of Equity Mutual Funds
- Exchange Traded Funds (ETFs)
- Derivatives i.e. Futures & Options
- Rights or Interest in Securities
- Securitized Debt Instruments
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 to calculate the Long Term Capital Gain on shares.
A trader having income from trading in securities and reporting 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.
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
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
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.