Definition
Securities Transaction Tax (STT) Structure
Securities Transaction Tax is a small levy on the value of trades in listed securities, charged at different rates for delivery, intraday, futures and options.
STT is collected at the time of transacting in listed shares and derivatives on recognised exchanges, with separate rates for delivery-based equity, intraday trades, futures and options, and on which side of the trade it applies. Because it is collected at source by the exchange, it is hard to evade.
Beyond raising revenue, STT historically tied into how gains were taxed, since concessional capital-gains treatment was linked to STT having been paid. For active traders, STT is a meaningful transaction cost, and changes to its rates in the Budget directly affect derivative-market economics.
Related terms
- Buyback TaxBuyback tax is the levy historically imposed on companies when they repurchased their own shares, treated as an alternative to dividend distribution.
- Commodities Transaction TaxCommodities Transaction Tax is a levy on the trading of non-agricultural commodity derivatives on recognised exchanges, mirroring the securities transaction tax.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.