STT (Securities Transaction Tax)

How it works

Securities Transaction Tax is a direct tax the government charges on transactions in listed securities — equity shares, equity mutual fund units, and F&O contracts — traded on a recognised exchange. It is deducted automatically by your broker at the moment of the trade and shown in your contract note, so there is nothing extra to file. STT is collected by the exchange and passed to the government.

The rates

Rates differ by segment. For equity delivery, STT is 0.1% on both the buy and sell. For intraday equity, it is 0.025% on the sell side only. In the F&O segment, options attract STT on the sale of the premium and on exercised contracts, while futures attract a small percentage on the sell side. The government has periodically raised F&O rates — notably in 2024 — and Budget proposals continue to tweak them, so always check current figures on your broker's charge list.

Why it matters

STT does two things. First, it is a real cost that eats into trading returns, especially for high-frequency intraday and F&O traders where it stacks up across many trades. Second, paying STT is what qualifies your equity gains for the favourable capital-gains regime — Section 111A (20% STCG) and Section 112A (12.5% LTCG above ₹1.25 lakh) apply only to STT-paid listed equity.

Common mistakes

Active traders often ignore STT when calculating profitability, then wonder why a string of small winning trades barely breaks even after costs. Long-term investors should remember the flip side: STT is the price of admission to the lower long-term tax rates that make patient equity investing so rewarding. Since rates differ across delivery, intraday and F&O and have been revised in recent budgets, never assume an old figure — always review the full, current charge breakdown on your contract note (STT, brokerage, GST, stamp duty, SEBI and exchange fees) to know your true cost per trade and your real break-even.