Definition
Securities Transaction Tax (STT)
Securities Transaction Tax is a small tax levied on the purchase and sale of securities like listed shares and derivatives on Indian stock exchanges, collected at the time of trade.
STT is charged on transactions in listed securities — equity shares, equity mutual funds and derivatives — executed on recognised exchanges, collected automatically by the broker at the time of trade. Rates differ by transaction type (delivery, intraday, futures, options).
Because STT is paid, equity gains qualify for the concessional capital-gains treatment applicable to listed securities. STT itself is generally not separately deductible against capital gains for individuals.
Though small per trade, STT adds to transaction costs, particularly for high-frequency traders. It is a routine, embedded cost of trading on Indian exchanges and appears in the contract note.
Related terms
- Expense RatioThe expense ratio is the annual fee a mutual fund or ETF charges as a percentage of assets, covering management and operating costs, which directly reduces investor returns.
- Capital Gains (Equity)Capital gains on equity arise when listed shares or equity funds are sold for profit, taxed as short-term or long-term depending on the holding period, with specific Indian rates.
- Demat AccountA demat account holds your shares and securities in electronic form, eliminating physical certificates and enabling seamless trading and settlement on stock exchanges.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.