{"id":6401,"date":"2024-06-26T10:38:15","date_gmt":"2024-06-26T10:38:15","guid":{"rendered":"https:\/\/wp-api.pocketful.in\/blog\/?p=6401"},"modified":"2026-02-02T10:44:39","modified_gmt":"2026-02-02T10:44:39","slug":"securities-transaction-tax-stt","status":"publish","type":"tax","link":"https:\/\/wp-api.pocketful.in\/blog\/tax\/securities-transaction-tax-stt\/","title":{"rendered":"What is Securities Transaction Tax (STT)?"},"content":{"rendered":"\n<p>Do you actively trade in the stock market and feel concerned about how multiple taxes imposed by the Indian government impact your returns? You\u2019re not alone. One such levy that directly affects every trade is the Securities Transaction Tax (STT).&nbsp;<\/p>\n\n\n\n<p>In this blog, we break down what STT is, how it works, and why it matters for traders and investors alike. &nbsp;<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/wp-api.pocketful.in\/blog\/tax\/securities-transaction-tax-stt\/#Overview_of_Securities_Transaction_Tax_STT\" title=\"Overview of Securities Transaction Tax&nbsp;(STT)\">Overview of Securities Transaction Tax&nbsp;(STT)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/wp-api.pocketful.in\/blog\/tax\/securities-transaction-tax-stt\/#History_of_Securities_Transaction_Tax\" title=\"History of Securities Transaction Tax\">History of Securities Transaction Tax<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/wp-api.pocketful.in\/blog\/tax\/securities-transaction-tax-stt\/#Meaning_of_Securities\" title=\"Meaning of Securities\">Meaning of Securities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/wp-api.pocketful.in\/blog\/tax\/securities-transaction-tax-stt\/#Features_of_STT\" title=\"Features of STT\">Features of STT<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/wp-api.pocketful.in\/blog\/tax\/securities-transaction-tax-stt\/#Securities_Transaction_Tax_Rate\" title=\"Securities Transaction Tax Rate\">Securities Transaction Tax Rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/wp-api.pocketful.in\/blog\/tax\/securities-transaction-tax-stt\/#Example_of_Securities_Transaction_Tax\" title=\"Example of Securities Transaction Tax\">Example of Securities Transaction Tax<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/wp-api.pocketful.in\/blog\/tax\/securities-transaction-tax-stt\/#Impact_of_Securities_Transaction_Tax_on_Investors\" title=\"Impact of Securities Transaction Tax on Investors\">Impact of Securities Transaction Tax on Investors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/wp-api.pocketful.in\/blog\/tax\/securities-transaction-tax-stt\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/wp-api.pocketful.in\/blog\/tax\/securities-transaction-tax-stt\/#Frequently_Asked_Questions_FAQs\" title=\"Frequently Asked Questions (FAQs)\">Frequently Asked Questions (FAQs)<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"h-overview-of-securities-transaction-tax-nbsp-stt\"><span class=\"ez-toc-section\" id=\"Overview_of_Securities_Transaction_Tax_STT\"><\/span>Overview of Securities Transaction Tax&nbsp;(STT)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Indian government levies this <a href=\"https:\/\/wp-api.pocketful.in\/blog\/tax\/types-of-taxes-in-india\/\">type of tax<\/a> on the buying and selling of shares, mutual funds with an equity focus, and derivatives that are exchanged on the Indian stock exchange. This tax, which is levied on the transaction value and applies to both share buyers and sellers, increases the transaction cost. The Securities Transaction Tax Act (STT Act) regulates this type of direct taxation. Unlisted shares sold through an IPO or other offer for sale to the public are likewise subject to this tax.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-history-of-securities-transaction-tax\"><span class=\"ez-toc-section\" id=\"History_of_Securities_Transaction_Tax\"><\/span>History of Securities Transaction Tax<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>P. Chidambaram, a former finance minister, instituted this tax in 2004. It is levied based on the value of securities, as the name implies (excluding commodities and cash). After numerous brokers and trading members protested this charge, the government was compelled to lower the STT tax in 2013.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-meaning-of-securities\"><span class=\"ez-toc-section\" id=\"Meaning_of_Securities\"><\/span>Meaning of Securities<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"1024\" src=\"https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Progress-overview-bro.png\" alt=\"Meaning of Securities\" class=\"wp-image-6407\" style=\"width:303px;height:auto\" srcset=\"https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Progress-overview-bro-1024x1024.png 1024w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Progress-overview-bro-300x300.png 300w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Progress-overview-bro-150x150.png 150w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Progress-overview-bro-768x768.png 768w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Progress-overview-bro-1536x1536.png 1536w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Progress-overview-bro-96x96.png 96w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Progress-overview-bro.png 2000w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>The term \u201cSecurities\u201d has been defined under the Securities Contracts (Regulation) Act and includes the following:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Shares, scripts, bonds, and other marketable securities.<\/li>\n\n\n\n<li>Derivatives instruments.<\/li>\n\n\n\n<li>Government securities of an equity nature.<\/li>\n\n\n\n<li>Units of equity-oriented mutual funds.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-features-of-stt\"><span class=\"ez-toc-section\" id=\"Features_of_STT\"><\/span>Features of STT<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ol class=\"wp-block-list\">\n<li>The tax rate varies based on the type of security and the type of transaction. For instance, the tax rate differs for delivery-based and intraday transactions.&nbsp;<\/li>\n\n\n\n<li>It is calculated as a fixed percentage of the transaction value.<\/li>\n\n\n\n<li>STT is levied on both buy and sell transactions.<\/li>\n\n\n\n<li>Depositories and exchanges collect it at the point of transaction and automatically deduct it during the settlement process.<\/li>\n\n\n\n<li>STT is a source of revenue for governments.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-securities-transaction-tax-rate\"><span class=\"ez-toc-section\" id=\"Securities_Transaction_Tax_Rate\"><\/span>Securities Transaction Tax Rate<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"1024\" src=\"https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Tax-bro-6-3.png\" alt=\"Securities Transaction Tax Rate\" class=\"wp-image-6413\" style=\"width:295px;height:auto\" srcset=\"https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Tax-bro-6-3-1024x1024.png 1024w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Tax-bro-6-3-300x300.png 300w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Tax-bro-6-3-150x150.png 150w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Tax-bro-6-3-768x768.png 768w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Tax-bro-6-3-1536x1536.png 1536w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Tax-bro-6-3-96x96.png 96w, https:\/\/cms-resources.pocketful.in\/blog\/wp-content\/uploads\/2024\/06\/Tax-bro-6-3.png 2000w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>The tax rates of STT for different types of transactions and securities are as follows-<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Purchase of Shares<\/strong> &#8211; In the case of delivery-based purchases of equity shares, the rate of STT is 0.1% and is paid by the purchaser at a price on which equity shares are purchased.<\/li>\n\n\n\n<li><strong>Sale of Shares<\/strong> &#8211; In the case of the delivery-based sale of equity shares, there is a similar tax rate of 0.1%, but the seller pays it at a price at which equity shares are sold. On an intraday basis, the applicable tax rate is 0.025%.<\/li>\n\n\n\n<li><strong>Equity Mutual Funds<\/strong> &#8211; In this case, units of an equity-oriented mutual fund sold outside of the delivery or transfer on a recognised stock exchange, the tax rate is 0.025% and is paid by the seller at a price on which equity share or units is sold. In a delivery-based sale, the seller pays 0.0001% of the price at which the unit was sold.<\/li>\n\n\n\n<li><strong>Derivative Options <\/strong>&#8211; On the sale of option contracts, STT is now levied at 0.15% of the option premium, payable by the seller.\u00a0<em>(Revised upward from 0.1%, reflecting a 50% hike.)<\/em><\/li>\n\n\n\n<li><strong>Derivative Futures<\/strong> &#8211; In the case of the sale of futures contracts, the applicable STT rate is 0.05% of the traded price, payable by the seller. <em>(Revised upward from 0.02%, reflecting a 150% hike.)<\/em><\/li>\n\n\n\n<li><strong>Exchange Traded Funds<\/strong> &#8211; In the case of exchange-traded funds, the applicable tax rate is 0.001% and is paid by the seller at the price at which units are sold.<\/li>\n\n\n\n<li><strong>Unlisted Shares<\/strong> &#8211; When unlisted shares, such as IPOs, are sold and later listed on a stock exchange, the tax rate is 0.2%, and the seller must pay it at the price at which the units are sold.&nbsp;<\/li>\n<\/ol>\n\n\n\n<p><strong>Read Also: <\/strong><a href=\"https:\/\/www.pocketful.in\/blog\/tax\/types-of-taxes-in-india\/\">Types Of Taxes In India: Direct Tax And Indirect Tax<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-example-of-securities-transaction-tax\"><span class=\"ez-toc-section\" id=\"Example_of_Securities_Transaction_Tax\"><\/span>Example of Securities Transaction Tax<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A trader buys 5 lots of Nifty call options at a premium of \u20b9120 and later sells them at \u20b9150. Since STT on options is charged only at the time of selling, the buying price does not matter for this calculation.<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-medium-font-size\" id=\"h-stt-calculation\">STT calculation<\/h3>\n\n\n\n<p>STT = 0.15% \u00d7 Selling Premium \u00d7 Lot Size \u00d7 Number of Lots<\/p>\n\n\n\n<p>STT = 0.15% \u00d7 150 \u00d7 65 \u00d7 5<\/p>\n\n\n\n<p>First, calculate the total option value at sell:<br>150 \u00d7 65 \u00d7 5 = 48,750<\/p>\n\n\n\n<p>Now apply STT:<br>0.15% of 48,750 = <strong>\u20b973.13 (approx.)<\/strong><\/p>\n\n\n\n<p>So, with a Nifty lot size of 65, the STT payable on this trade would be <strong>around \u20b973.13<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-medium-font-size\" id=\"h-futures-trading-updated-stt-rate\">Futures Trading (Updated STT Rate)<\/h3>\n\n\n\n<p>Under the revised rules, STT on futures trades has been increased to <strong>0.05%<\/strong>, up from the earlier 0.02%.<\/p>\n\n\n\n<p>Assume a trader buys <strong>5 lots of Nifty futures<\/strong> at <strong>\u20b923,000<\/strong> and later sells them at <strong>\u20b923,010<\/strong>. The <strong>lot size is 65<\/strong>.<\/p>\n\n\n\n<p>For futures contracts, STT is charged <strong>only on the selling side<\/strong>, so the buy price does not come into play here.<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-medium-font-size\" id=\"h-stt-calculation-0\">STT Calculation<\/h3>\n\n\n\n<p>STT = 0.05% \u00d7 Selling Price \u00d7 Lot Size \u00d7 Number of Lots<\/p>\n\n\n\n<p>STT = 0.05% \u00d7 23,010 \u00d7 65 \u00d7 5<\/p>\n\n\n\n<p>First, calculate the total contract value on sell:<br>23,010 \u00d7 65 \u00d7 5 = 7,478,250<\/p>\n\n\n\n<p>Now apply STT:<br>0.05% of 7,478,250 = <strong>\u20b93,739.13 (approx.)<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-impact-of-securities-transaction-tax-on-investors\"><span class=\"ez-toc-section\" id=\"Impact_of_Securities_Transaction_Tax_on_Investors\"><\/span>Impact of Securities Transaction Tax on Investors<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This tax has a significant impact on <a href=\"https:\/\/wp-api.pocketful.in\/blog\/top-investors-in-india-and-their-portfolios\/\">investors in India<\/a>; let us understand how.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Transaction Cost <\/strong>\u2013 The applicable STT rate increases the cost of trading, eventually leading to a decline in investors&#8217; returns, especially for those who trade frequently.<\/li>\n\n\n\n<li><strong>Liquidity<\/strong> \u2013 As the STT will increase the transaction cost and decrease the trader\u2019s profit, some investors prefer to stay away from the market and look for some other investment option, which will impact the market volume.<\/li>\n\n\n\n<li><strong>Investment strategies <\/strong>\u2013 This can impact the investment strategy as market participants may shift to long-term investing rather than short-term trades.<\/li>\n\n\n\n<li><strong>Net Return <\/strong>&#8211; The net return earned by the investor will reduce because of STT.<\/li>\n<\/ol>\n\n\n\n<p><strong>Read Also: <\/strong><a href=\"https:\/\/www.pocketful.in\/blog\/tax\/capital-gains-tax\/\">What is Capital Gains Tax in India?<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-conclusion\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In summary, the government charges a securities transaction tax on all transactions, including the purchase of stocks, <a href=\"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds-meaning-types-features-benefits-and-how-they-work\/\">mutual funds<\/a>, derivatives, and other financial instruments on stock exchanges. Without a doubt, these taxes reduce your net return, but there is no getting around the fact that the Indian government depends heavily on them.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-frequently-asked-questions-faqs\"><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions_FAQs\"><\/span>Frequently Asked Questions (FAQs)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div class=\"saswp-faq-block-section\"><ol style=\"list-style-type:none\"><li style=\"list-style-type: none\"><h3 class=\"\">Is the Securities Transaction Tax a direct tax or indirect tax?<\/h3><p class=\"saswp-faq-answer-text\">The STT is a direct tax levied on the purchase and sale of equity and equity-related instruments listed on Indian Stock Exchanges.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">Is there any way to avoid paying STT on transactions?<\/h3><p class=\"saswp-faq-answer-text\">No, if you made any purchase or sale of equity shares or mutual fund units, it will automatically be deducted.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">What is the difference between Capital gain tax and Securities Transaction Tax?<\/h3><p class=\"saswp-faq-answer-text\">STT is a kind of direct tax applicable at the time of transaction made in securities, whereas capital gain tax is levied on the profit arising on the sale of assets.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">In which year was the Securities Transaction Tax introduced in India?<\/h3><p class=\"saswp-faq-answer-text\">STT was introduced in 2004 by former finance minister P. Chidambaram.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">Is STT applicable on both buy and sell?<\/h3><p class=\"saswp-faq-answer-text\">Yes, STT is applicable to both buying and selling securities listed on Indian Stock Exchanges.<\/p><\/ul><\/div>","protected":false},"excerpt":{"rendered":"<p>Do you actively trade in the stock market and feel concerned about how multiple taxes imposed by the Indian government impact your returns? You\u2019re not alone. One such levy that directly affects every trade is the Securities Transaction Tax (STT).&nbsp; In this blog, we break down what STT is, how it works, and why it [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":6636,"parent":0,"menu_order":0,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[18],"class_list":["post-6401","tax","type-tax","status-publish","format-standard","has-post-thumbnail","hentry","category-personal-finance"],"acf":{"freelancer":"Akash Gupta"},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v20.13 (Yoast SEO v21.2) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Security Transaction Tax (STT): Features, Example &amp; Impact -Pocketful<\/title>\n<meta name=\"description\" content=\"The Indian government levies the Securities Transaction Tax on shares, equity-focused mutual funds, and derivatives, raising transaction costs. 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