income tax
Securities Transaction Tax (STT) is a direct tax imposed on purchases and sales of securities on particular stock exchanges of India. It was introduced into effect to contribute to the capital markets' taxation regime and prevent evasion, and subsequently it became part of the Indian financial system.
A security refers to any financial instrument which can be traded, and these instruments are:
This definition is provided under the Securities Contracts (Regulation) Act, 1956.
A transaction refers to any sale or purchase of a security.
STT was introduced with the aim to:
STT is charged on both buying and selling of the following securities when traded on Indian recognized stock exchanges:
STT does not apply to:
The rates and regulations for STT were last updated in October 2024 and April 2023. The rates that are applicable are as follows:
| Transaction Type | STT Rate | Responsible Party | Value Basis |
|---|---|---|---|
| Delivery-based purchase (shares/trusts) | 0.1% | Buyer | Acquisition Price |
| Delivery-based sale (shares/trusts) | 0.1% | Seller | Sales Price |
| Intraday sale (non-delivery) | 0.025% | Seller | Sale Price |
| Transaction Type | STT Rate | Party Responsible | Basis of Value |
|---|---|---|---|
| Sale (delivery-based) | 0.001% | Seller | Sale Price |
| Buy | NIL | - | - |
| Sale to Mutual Fund (ETF) | 0.001% | Seller | Sale Price |
| Sale/redemption to insurance (ULIP, post-Feb 2021) | 0.001% | Seller | Sale Price |
| Type of Transaction | STT Rate | Responsible Party | Basis of Value |
|---|---|---|---|
| Futures (sell side) | 0.0125% | Seller | Traded Value |
| Sell side options | 0.0625% | Seller | Premium |
| Options (exercised) | 0.125% | Seller | Settlement Price |
| Transaction Type | STT Rate | Party Responsible | Basis of Value |
|---|---|---|---|
| Sale of unlisted shares in IPO (post listing) | 0.2% | Seller | Sale Price |
STT is collected by the established stock exchanges, mutual funds (for transactions in the fund), or merchant bankers (for IPOs). It must be remitted to the government by the 7th of the following month from the date of the transaction. If collection or remittance of STT is delayed, interest and penalty are attracted.
STT is not levied on:
15% tax for listed shares/equity mutual funds held for up to 12 months (Section 111A).
For listed shares/equity mutual funds, held for more than 12 months, a 10% tax (Section 112A) is charged on gains exceeding ₹1 lakh a year, without indexation.
Unlisted shares do not qualify for reduced STT rates and are charged at slab rate for short-term and 20% (with indexation) for long-term.
Note: STT paid may be claimed as a deduction under Section 36 of Income Tax Act for business income.
STT is mandatory for trades on recognized stock exchanges for qualifying securities and is automatically deducted. Off-market transactions are not subject to STT but are not entitled to preferential rates of capital gains tax.
STT is never refundable in any circumstance, even in the case of losses or mistakes in transactions. While it is allowed as a deduction for business profits, it is not permitted for deducting capital gains.
Q: What are the future STT rates for futures and options in 2025? A: The rate of STT as of October 2024 is 0.0125% on the sell side in the case of futures, 0.0625% in the case of options, and 0.125% in the case of exercised options.
Q: Who is asked to collect STT? A: Recognized stock exchanges, merchant bankers, or mutual funds collect STT and remit the same to the government by the 7th of the month after the transaction.
**Q: Is STT levied on off-market or private share transfers? A: No, STT is only payable on transactions entered into on recognized stock exchanges.
Q: Is STT deductible as a tax expense? A: Only when trading income is treated as business income; otherwise, STT cannot be deducted.
Q: Is STT refundable? A: No, STT cannot be refunded in any situation.
An understanding of the Securities Transaction Tax (STT) is essential for investors and traders dealing in India's capital markets. Understanding its rates, applicability, and tax consequences ensures compliant and informed decision-making.