Securities Transaction Tax (STT) is a tax levied on transactions of specific listed securities in India. Learn how STT rates vary by trade type, how the tax affects your returns, and where to check the charges in your trading documents.
Quick Overview:
- STT applies to eligible securities transactions, whether they result in a profit or a loss.
- Equity delivery trades attract STT of 0.1% on both the purchase and sale sides, while intraday sales attract 0.025%.
- STT on futures and options follows different rates, with the applicable charge varying by transaction type.
Have you ever wondered why a profitable trade doesn’t always translate into the same amount in your account? Securities Transaction Tax (STT) is one of the charges that can reduce the amount you ultimately receive, alongside brokerage and other transaction costs. STT applies to eligible securities transactions, whether you make a profit or incur a loss.
Read on to understand what STT is, how it is calculated, the rates applicable in 2026, and how it affects your capital gains and business income.
What Is Securities Transaction Tax (STT) in India?
Securities Transaction Tax (STT) is a direct tax levied on specific securities listed on India’s stock exchanges. It applies to eligible purchases and sales, whether you make a profit or incur a loss.
Unlike capital gains tax, which applies to the profit you earn when you sell an investment, STT is levied on the transaction itself, regardless of whether it results in a gain or a loss.
The Government of India introduced STT in 2004 under Chapter VII of the Finance (No. 2) Act, 2004. This Act lays down the rules for calculating, collecting, and paying STT, as well as the transactions it applies to. The framework introduced in this Act determines the STT you pay on different types of securities transactions.
How is STT Calculated?
Let’s take an example of an equity delivery transaction. Suppose you purchase 100 shares of a company at ₹500 each and later sell them at ₹600 each through a stock exchange. For this transaction, the STT will be charged at 0.1% on both the purchase and sale value.
- STT on purchase: ₹50,000 × 0.1% = ₹50
- STT on sale: ₹60,000 × 0.1% = ₹60
- Total STT payable: ₹50 + ₹60 = ₹110
Thus, the total STT charged on these transactions is ₹110, irrespective of the profit earned.
Why Was STT Introduced in the Indian Stock Market?
The Government of India introduced STT to collect tax directly at the point of a security transaction. Because tracking and taxing large volumes of market transactions was difficult at the time, STT made tax collection more transparent and straightforward.
When is STT Applicable?
STT applies to specified transactions in securities carried out through recognized stock exchanges. The tax depends on the security type, the nature of the transaction, and how the trade is settled.
The following transactions attract STT:
- Equity shares: Purchase or sale of listed equity shares settled through actual delivery, as well as eligible non-delivery sales.
- Equity-oriented mutual funds: Sale of units through a recognized stock exchange and redemption of units with the mutual fund.
- Business trust units: Purchase or sale of units in a business trust, such as a REIT or InvIT, through a recognized stock exchange.
- Futures and options: Sale of futures and options contracts in securities. STT also applies when an option is exercised.
- Equity-oriented ULIPs: Sale, surrender, or redemption of eligible units.
- Specified unlisted securities: Sale of unlisted equity shares or business trust units under a public offer for sale in an Initial Public Offering (IPO), where the securities are subsequently listed on a recognized stock exchange.
Note: STT does not apply to every transaction. Off-market transactions, which take place outside a recognized stock exchange, generally fall outside its scope.
What Is the STT Rate in India in 2026?
Union Budget 2026–27 revised the STT rates on futures and options, with the changes taking effect from 1 April 2026. The rates for equity delivery and intraday transactions remain unchanged.
The table below lists the STT rates applicable to different securities transactions in India in 2026.
| Nature of transaction | STT rate | Who pays? |
| Purchase of equity shares or business trust units through a recognized stock exchange, settled by actual delivery | 0.10% | Buyer |
| Sale of equity shares or business trust units through a recognized stock exchange, settled by actual delivery | 0.10% | Seller |
| Sale of equity shares, equity-oriented mutual fund units, or business trust units through a recognized stock exchange, settled without actual delivery | 0.025% | Seller |
| Purchase of equity-oriented mutual fund units through a recognized stock exchange, settled by actual delivery | Nil | Buyer |
| Sale of equity-oriented mutual fund units through a recognized stock exchange, settled by actual delivery | 0.001% | Seller |
| Sale of equity-oriented mutual fund units to the mutual fund | 0.001% | Seller |
| Sale of an option in securities | 0.15% of the option premium | Seller |
| Sale, surrender or redemption of units of an equity-oriented fund to an insurance company on maturity or partial withdrawal, for eligible ULIPs issued on or after 1 February 2021 | 0.001% | Seller |
| Sale of an option in securities where the option is exercised | 0.15% of the intrinsic value | Buyer |
| Sale of a futures contract in securities | 0.05% of the traded value | Seller |
| Sale of unlisted equity shares under a public offer for sale in an IPO, where the shares are subsequently listed | 0.20% | Seller |
| Sale of unlisted business trust units under a public offer for sale in an IPO, where the units are subsequently listed | 0.20% | Seller |
STT adds to the cost of a securities transaction, but its impact doesn’t end there. It can also influence how you report investment gains and trading income.
How Does STT Affect Capital Gains and Tax Filing?
STT affects how you calculate your taxable gains and report your trading income. Its treatment depends on whether you hold securities as investments or trade them as a business.
- For investors: STT paid on eligible transactions does not reduce your capital gains. Section 48 of the Income-tax Act, 1961 (Section 72 of the Income-tax Act, 2025) does not allow you to deduct STT from your sale proceeds or add it to your purchase cost. STT makes your gains eligible for the concessional capital gains rates under Sections 111A and 112A (Sections 196 and 198 of the 2025 Act).
- For traders: If you classify intraday or F&O trading income as business income, you can deduct STT paid on eligible business transactions as an expense under Section 36(1)(xv) (Section 32 of the 2025 Act). This reduces your taxable business income.
- For ITR filing: If you earn capital gains as an investor, you can report them in ITR-2. On the other hand, if you report trading income as business income, you can use ITR-3.
Your capital gains and trading income may be taxed differently, but your trading documents record the numbers behind that treatment. Your contract note and P&L statement can help you trace exactly how much STT you paid and where it appears.
How to Check STT in Your Contract Note and P&L Statement?
A contract note is a document your broker issues after the trading day that summarizes the trades you executed. It records the transaction details, brokerage, taxes, and other applicable charges.
A Profit and Loss (P&L) statement, on the other hand, summarizes your trading gains and losses over a specific period.
You can check your STT in both documents:
- Contract note: Open the contract note for the trading day and look for the STT entry in the charges section. It shows the STT charged on your executed trades, separately from brokerage, GST, and other levies.
- P&L statement: Download your realized P&L report from your broker’s trading platform. Check the charges or tax breakdown, if available, to see the STT incurred on your transactions. If STT is not listed separately, refer to your contract notes or the broker’s charges report for the exact amount.
Reviewing both documents helps you verify the STT charged on your trades and understand how it contributes to your overall trading costs.
Conclusion
STT is one part of the cost of participating in the stock market, but how you approach the market shapes how much it matters. For active traders, frequent transactions can make these charges add up over time. For long-term investors, STT is usually a smaller part of the picture.
The key is to consider the costs of entering and exiting a position, how often you trade, and the returns you retain after accounting for taxes. A clearer view of these details helps you judge whether a market decision aligns with your financial goals.
