STT Charges – What is Securities Transaction Tax?Government Taxes You Cannot Avoid!

STT Charges - What is Securities Transaction Tax?

If you are looking to learn What is STT Charges, I would assume you are a beginner in trading or the one who just had a look at the contract note and got surprised to see various government charges, STT being a more tricky one to understand.

Well, you are in the right place. Today you will learn everything about STT Tax with real trade examples!

Let’s get started!

Content:

STT Full Form & Meaning

The full form of STT is Securities Transaction Tax. It is a direct tax levied by the government when you buy and sell securities like Equities, Mutual Funds and Futures & Option in the stock market. The tax rate of STT varies based on 3 factors:

  1. The type of securities you trade (Equity, Futures & Option, Mutual Funds etc)
  2. If it is a buy or sell transaction.
  3. Trade Duration (Intraday / Equity Delivery)

That sounds a bit hard to understand, continue reading below to understand how STT is charged in every possible scenario in the stock market.

STT Rate on Equity Intraday

Securities Transaction Tax on intraday trading will be charged only on the overall sell value of the transaction at the rate of 0.025%.

Example: Let’s say on a Monday morning you bought shares worth ₹ 50,000 and sold them at  ₹ 60,000 before market close. Here’s how much STT Tax will be charged on this transaction:

Sell Value of Shares STT Tax @ 0.025% 
₹ 60,000 ₹ 15

Calculate STT easily with Aliceblue Brokerage Calculator.

STT Tax on Equity Delivery

STT on shares bought via delivery is charged on both buy and sell side of the transaction at the rate of 0.10%.

Example: Assume you bought shares worth ₹ 1,00,000 in 2018 and sold them for ₹ 1,50,000 in 2020. Here’s how much STT Tax will be charged on this transaction:

Shares ValueSTT Tax @ 0.10% 
Buy Value ₹ 1,00,000 + Sell Value ₹ 1,50,000 = ₹ 2,50,000 Total Shares Value₹ 250

STT Tax on Equity Futures

Security Transaction Tax Rate on Equity Futures will be charged only on the overall sell value of the transaction at the rate of 0.01%. STT Rate for futures remains the same for intraday as well as positional trades.

Example: Assume you entered into a futures contract worth ₹ 1,00,000 on Monday and sold them for ₹ 1,20,000 on Wednesday. Here’s how much STT Tax will be charged on this transaction:

Sell Side Shares Value STT Tax @ 0.01% 
₹ 1,20,000 ₹ 12

STT Tax on Equity Options

Security Transaction Tax Rate on Equity Options will also be charged only on the overall sell value of the transaction at the rate of 0.05%. STT Rate for options remains the same for intraday as well as positional trades.

Example: Assume you entered into an options contract worth ₹ 1,00,000 on Monday and sold them for ₹ 1,20,000 on Wednesday. Here’s how much STT Tax will be charged on this transaction:

Sell Side Shares Value STT Tax @ 0.05% 
₹ 1,20,000 ₹ 60

Note: STT Charges are not applicable for Currency Futures and Options Contracts.

For Commodity Futures and Options Contracts, similar taxes like STT are charged called CTT. Let’s learn more about it below:

CTT Full Form & Meaning

The full form of CTT is Commodity Transaction Tax. It is similar to STT and is levied when you buy and sell commodity futures and options contracts. CTT Tax came into effect in July 2013 and is charged only on Non-Agri Commodities like Gold, Silver, Copper, Crude Oil, etc. 

CTT Tax on Commodity Futures

Commodity Transaction Tax Rate on Futures will be charged only on the overall sell value of the transaction at the rate of 0.01%. STT Rate for futures remains the same for intraday as well as positional trades.

Example: Assume you entered into a futures contract worth ₹ 1,00,000 on Monday and sold them for ₹ 1,20,000 on Wednesday. Here’s how much CTT Tax will be charged on this transaction:

Sell Side Shares Value CTT Tax @ 0.01% 
₹ 1,20,000 ₹ 12

CTT Tax on Commodity Options

Commodity Transaction Tax Rate on Options will be charged only on the overall sell value of the transaction at the rate of 0.05%. CTT Rate for options remains the same for intraday as well as positional trades.

Example: Assume you entered into an options contract worth ₹ 1,00,000 on Monday and sold them for ₹ 1,20,000 on Wednesday. Here’s how much STT Tax will be charged on this transaction:

Sell Side Shares Value CTT Tax @ 0.05% 
₹ 1,20,000 ₹ 60

STT in Mutual Funds

Security Transaction Tax is charged only for equity-oriented mutual funds only on the sell side of the transaction. It is charged at a rate of 0.001% of the unit value. 

Example: Assume you bought equity-oriented mutual funds worth ₹ 1,00,000 in 2018 and sold them for ₹ 1,50,000 in 2020. Here’s how much STT Tax will be charged on this transaction:

Shares ValueSTT Tax @ 0.001% 
₹ 1,50,000₹ 1.5 

Quick Summary

  • STT is a direct tax levied by the government when you buy and sell securities in the stock market.
  • The tax rate of STT varies based on 3 factors:
    • The type of securities you trade (Equity, Futures & Option, Mutual Funds etc)
    • If it is a buy or sell transaction.
    • Trade Duration (Intraday / Equity Delivery)
  • STT Tax on Intraday Trading, Equity Futures & Options, and Equity-oriented Mutual Funds will be charged only on the sell side of the transaction.
  • STT on shares bought via delivery is charged on both buy and sell side of the transaction.
  • Commodity Transaction Tax is similar to STT and is levied when you buy and sell commodity futures and options contracts.
  • CTT tax is charged only on Non-Agri Commodities.

FAQ(Frequently Asked Questions)

1. How Can We Reduce STT Charges In Intraday Trading?

The full form of STT Charges is Securities Transaction Tax, these charges are controlled by the Government of India on the value of transactions. So, technically we cannot reduce the charges.

2. Can STT Be Claimed?

No, STT charges cannot be claimed. You will have to pay the capital gain taxes, in Long term Capital Gain on equity mutual funds the charge is 10% and in Short term Capitlal Gain, the charge is 15%.

3. Is STT Same For All Brokers?

Yes, STT charges are same for all the Stock Brokers in India. As these charges are defined by the Government of India.

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Vinayak Hagargi

Vinayak is Impressively Enthusiastic about Financial Markets, Research & Curating Layman-Friendly Content. He has been Successfully Contributing to the Financial Markets for over 2 years & has written over 100+ articles. He aims to continue sharing his knowledge to empower newbies with Relatable, & Easy to Understand Content.

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