What is STT

The plain answer

STT, the Securities Transaction Tax, is a government tax collected on exchange transactions at the moment of trade. On equity delivery it is 0.1% of the trade value on both buy and sell; on intraday it is 0.025% on the sell side; futures carry 0.02% on the sell and options 0.1% of the premium on the sell. The rates are set in the Finance Act, they are identical at every broker, and they print on every contract note.

STT is a transaction tax, not an income tax. It is charged on the traded value regardless of whether the trade made a profit or a loss, and it cannot be claimed back in your return the way TDS can. Its job is to tax the activity of trading itself, which is why a losing year still produces STT.

For most delivery investors, STT is quietly the largest charge on a trade. On a ₹1,00,000 buy it is ₹100, while the brokerage on the same order at a discount broker is ₹20 or less. Understanding the tax means two things: reading its rate table, and knowing exactly where it shows up in your statements, both of which this page covers.

The rates

The rate depends on the segment you trade in and the leg of the trade. The table below is the full schedule that applies to retail equity trading:

Two readings to notice. Options STT is computed on the premium, not on the notional contract value, so a ₹10,000 premium paid on a much larger position still produces ₹10 of STT. And the mutual fund row is the only place where fund transactions face STT at all: buying units, including through a systematic plan, carries none, and only the redemption leg pays the small 0.001%.

The schedule applies as published by the exchanges and printed by every broker today. Rates have been revised by successive Finance Acts, so the number to use is always the one on your current contract note, never a figure remembered from an older article.

How collection works

STT is collected through the market infrastructure itself, which is why it cannot be avoided, negotiated or bundled. The chain from your order to the government's account runs like this:

Because the exchange does the collection, the rate is the same at every broker, and the amount cannot be changed by anything your broker does. The tax lands in your contract note and your ledger on the same day as the trade. No separate return or payment action is ever needed from you.

One consequence worth stating plainly: no broker can waive STT. A "zero brokerage" scheme refers to the brokerage line only, and even the most generous offer ever published leaves the STT intact, because the broker is not the one who set it.

Worked amounts

The table shows the STT on realistic order sizes in each segment, computed at the current rates:

The delivery rows show why STT deserves attention in round-trip planning: buying and then selling ₹1,00,000 of shares produces ₹220 of STT alone, against ₹40 of brokerage at a discount broker. The tax is the fixed gravity on every in-and-out decision, and it scales with value while brokerage stays capped.

A round trip, line by line

To see STT in proportion, here is the complete charge line-up for buying ₹1,00,000 and later selling ₹1,20,000 of the same share at a discount broker:

STT is ₹220 of the roughly ₹314 total, about 70% of everything paid on the round trip. It is the only line that is both unavoidable and large, and it is worth that proportion on virtually every delivery round trip an investor makes.

The tax across a year

STT is best read annually, not per trade. The arithmetic stays simple because the rates are fixed: 0.1% of every delivery buy and sell, 0.025% of every intraday sell. An investor who buys ₹25,000 of shares every month pays ₹25 of STT per buy, ₹300 across the twelve months on ₹3,00,000 invested, exactly 0.1% of the deployed amount.

The table's point is the design: STT is a fixed proportion of activity. The broker's ledger shows the running total, and the annual reports carry it into the year's cost picture. Nothing about the tax is negotiable, and nothing about it rewards cleverness; it simply tracks how much you traded.

Where STT came from

STT was introduced by the Finance (No. 2) Act of 2004, with collection beginning on 1 October 2004. The design was deliberate: instead of taxing paper transfers that were easy to under-report, the tax attaches to the electronic execution itself, and the exchange's matching engine does the collection with no scope for understatement. India was one of the first markets to build a transaction tax into the trading rails.

The 2018 row matters more than it looks. When long-term gains on listed shares were made taxable in 2018, the law used STT as the eligibility filter: only shares that had paid the tax at both acquisition and transfer get the concessional rates. A tax once designed for collection quietly became the gatekeeper of the capital gains regime.

STT and mutual funds

Fund investing is almost entirely outside STT. Buying units, whether as a lump sum or through a systematic investment plan, carries no STT, and neither do new fund offers or IPO applications. The one exception sits on the exit: redeeming units of an equity-oriented fund back to the fund house carries STT of 0.001% of the redemption value, collected at redemption. On a ₹50,000 redemption that is 50 paise.

The exception map is worth completing. Debt fund redemptions carry no STT. Exchange-traded funds bought and sold on the exchange follow the share schedule instead of the fund schedule, because the trade runs through the equity segment. The rule of thumb: STT follows the trading rails, and anything that transacts through the exchange pays the segment rate.

One more boundary completes the map: exchange-traded funds trade on the exchange like shares, so their buys and sells carry the full share schedule, not the fund schedule. Only the redemption of units directly to the fund house gets the small 0.001%. The distinction follows the rails again: exchange trade, segment rate; fund-house transaction, fund rate.

STT and the concessional rates

Sections 111A and 112A, the sections behind the 20% short-term and 12.5% long-term rates, apply only where STT was paid at acquisition and at transfer of the shares. A share bought off-market with no STT, and sold on the exchange, can fall outside the concessional schedule and land in the ordinary capital gains provisions instead.

The law covers the common non-STT acquisition routes with published exemptions (Notification 43/2017 of June 2017): IPO allotments, bonus shares and rights issues, where acquisition happens without a trade, are treated as eligible, so the concessional rates still apply when those shares are later sold on the exchange. The practical consequence: for anything you bought through your demat in the ordinary way, the concessional sections apply; for unusual acquisition routes, the question of eligibility is one for the CA, and the contract notes are the evidence either way.

A contrast case makes the point. Shares bought through the exchange carry STT on the buy leg and qualify for the concessional sections when sold. Shares acquired through a route with no STT, and not covered by the published exemptions, can instead fall under the ordinary provisions when sold, which is a materially different rate card. For the overwhelming majority of investors the ordinary exchange route applies and the concessional sections follow; the exceptions belong on the CA's desk with the contract notes in hand.

Corporate actions and STT

Corporate actions themselves carry no STT, because no exchange trade happens in them. Bonus shares are credited without STT, rights shares are allotted without it, splits and dividends happen without it. The demat entries change, the positions change, and the tax takes no interest until a trade occurs.

The trade that follows carries the full schedule. Selling bonus shares triggers the ordinary 0.1% sell-side STT like any delivery sell, and the buy-side condition for the concessional sections is handled by the published exemptions, which treat those non-trade acquisitions as eligible. The STT question on a corporate action is therefore always about the later sell, never about the event itself.

One event sits in between: a buyback. Where the tender runs through the exchange, as listed-company buybacks do, tendering your shares executes as an exchange sell and carries the sell-side STT at the delivery rate. The proceeds, the STT line and the tax treatment all follow the ordinary sell path, with the buyback price playing the role of the sale price.

Old and inherited shares

The sell-side STT applies to every exchange sell of delivery shares, regardless of how the shares were acquired. Shares bought before STT began in 2004, shares inherited from a parent, shares received as a gift, an IPO allotment: the day you sell them on the exchange, the 0.1% sell-side STT applies to the sell value. The tax looks at the transaction, not the history of the position.

What the history affects is the income tax treatment, not the STT. The concessional Sections 111A and 112A look at whether STT was paid at acquisition, and where acquisition happened without a trade, the published exemptions carry the position forward. The sell-side STT, by contrast, has no exemptions at all.

The practical check follows: any sell executed on the exchange shows the STT line. If the line is missing, the sell did not happen on the exchange, which is a different situation to resolve, not a tax saving to enjoy.

STT vs stamp duty

STT and stamp duty are the two statutory levies on a trade, and they are frequently mistaken for each other. They differ in every dimension that matters:

Stamp duty on shares moved to a single nationwide rate on 1 July 2020, and it is charged only when you buy. STT follows the segment table above and hits one or both legs depending on the trade. When you audit a contract note, the two lines sit next to each other; treat them as separate taxes with separate rules, because that is what they are.

A rupee comparison fixes the scale: on a ₹50,000 delivery buy, STT is ₹50 while stamp duty is ₹7.50; on a ₹50,000 intraday position, the sell-side STT is ₹12.50 while the buy-side stamp duty is ₹1.50. STT is the heavier levy in every segment, which is why it deserves the larger share of attention on any contract note.

STT and your taxes

STT is not income tax, and it does not appear in Form 26AS or reduce your tax bill as a credit. What it does do is shape how your income tax is computed on the trades themselves.

For delivery shares held as investments, the gain or loss is capital gains. The STT you paid on the buy leg adds to your cost of acquisition, which lowers the taxable gain when you sell. Paying STT is also a condition for the concessional rates: Sections 111A and 112A apply only to listed shares on which STT was paid at acquisition and transfer. A share bought through an off-market route with no STT can fall outside the concessional schedule entirely.

For intraday and futures and options, the income is business income: intraday gains are speculative business income under Section 43(5), and F&O income is non-speculative business income. Those trades never enter the capital gains statement; they live in a separate trading report, and the STT on them sits with the business figures rather than the capital gains computation. Whether the STT on those trades is deductible as a business expense is a provision your CA applies for the assessment year in question, since the treatment has been amended more than once since STT began in 2004. The one rule that never changes: STT is paid on every relevant trade, profitable or not.

The full arithmetic of the capital gains side, including the rates and the ₹1.25 lakh exemption, lives on the capital gains page.

Where it shows

Every executed order prints an STT line on the contract note, with the rate and the amount in their own columns, and the note's totals section sums STT across the legs of that trade. Because the rate is statutory, the column reads the same at every broker for the same segment, which makes STT the easiest line on any note to audit: multiply the trade value by the table rate, and the number should match to the rupee.

The same amount also flows into your ledger, and for delivery trades into the annual capital gains statement, where the buy-side STT sits inside the reported cost of acquisition. The order window shows an estimated STT before you confirm an order, so the number is never a surprise after the fact. When a charge looks wrong, STT is the line to check first, because it is the one whose arithmetic anyone can verify by hand.

The limits of this page

What people usually get wrong

Questions people ask

Where to go next

Sources

• ITAT Online. “CBDT issues FAQs on taxation of LTCG as per Finance Bill 2018.” Accessed 16 August 2026.
• HDFC Mutual Fund. “Mutual fund fees and charges in India.” Accessed 16 August 2026.
• Upstox. “Brokerage charges.” Accessed 16 August 2026.
• Fi Money. “Everything you need to know about Securities Transaction Tax.” Accessed 16 August 2026.