If you buy or sell shares, trade intraday, or participate in Futures and Options (F&O) in the Indian securities market, you may notice a charge called STT on your broker's contract note.

STT stands for Securities Transaction Tax.

It is a tax imposed on specified securities transactions in India. Unlike income tax on capital gains or business profits, STT is generally collected at the transaction level when an eligible securities transaction takes place.

This means you may have to pay STT even when the trade ultimately results in a loss.

STT was introduced through the Finance (No. 2) Act, 2004 and applies to specified transactions involving securities through recognised stock exchanges and certain other specified transactions.

For investors and traders, understanding STT is important because it directly affects:

• Trading costs
• Intraday profitability
• F&O profitability
• Delivery investment costs
• Break-even calculations
• Capital-gains taxation
• Business-income computation
• Accounting and bookkeeping
• ITR preparation
• Reconciliation of broker contract notes

2. What Is Securities Transaction Tax (STT)?

Securities Transaction Tax (STT) is a tax charged on certain purchases and/or sales of securities.

Depending on the type of transaction, STT may be payable by:

• Buyer
• Seller
• Both buyer and seller

The applicable rate and the value on which STT is calculated also vary according to the transaction.

For example:

Equity delivery trade

STT may apply to both purchase and sale.

Equity intraday trade

STT generally applies on the sell side.

Futures

STT applies on the sale transaction.

Options

STT treatment depends upon whether the option is sold or exercised.

3. Is STT the Same as Capital Gains Tax?

No.

This is one of the most important concepts to understand.

STT and income tax on investment/trading income are different taxes.

STT is transaction-based.

Capital gains tax or business-income tax is based on the applicable income-tax provisions and the nature of the income.

Therefore:

Paying STT does not automatically mean that your income-tax liability on the resulting profit has been paid.

You may pay STT on the stock-market transaction and still have income-tax liability on the resulting capital gain or business profit.

4. Latest STT Rates Applicable in 2026

The STT rates depend on the security and type of transaction.

Important F&O Change from 1 April 2026

The Finance Act, 2026 revised STT applicable to specified derivatives transactions.

From 1 April 2026:

Transaction	STT Rate	Generally Payable By
Equity share delivery – Purchase	0.1%	Purchaser
Equity share delivery – Sale	0.1%	Seller
Non-delivery/intraday equity sale	0.025%	Seller
Sale of equity-oriented mutual fund unit on exchange with delivery	0.001%	Seller
Sale of equity-oriented fund unit to Mutual Fund	0.001%	Seller
Futures – Sale	0.05%	Seller
Options – Sale	0.15% of option premium	Seller
Exercised option	0.15% of intrinsic price	Purchaser

Important

Older websites, articles, screenshots and trading guides may still show rates such as:

• Futures: 0.01%
• Futures: 0.0125%
• Futures: 0.02%
• Options: 0.05%
• Options: 0.0625%
• Options: 0.1%

These may relate to earlier periods.

For transactions entered into on or after 1 April 2026, investors and traders should verify the latest applicable rates before performing calculations.

5. Major STT Change: Old vs New F&O Rates

The 2026 changes are especially important for active F&O traders.

F&O Transaction	Rate Before 1 April 2026	Rate From 1 April 2026
Futures sale	0.02%	0.05%
Option sale	0.10% of premium	0.15% of premium
Exercised option	0.125% of intrinsic price	0.15% of intrinsic price

Therefore, old trading-cost calculators or spreadsheets should not automatically be relied upon for transactions after the effective date.

6. How Is STT Collected?

For normal exchange-traded transactions, investors generally do not have to separately visit a government portal to deposit STT for each trade.

A simplified process is:

Investor/Trader places order

↓

Trade executes

↓

Applicable STT is calculated

↓

STT appears as part of transaction charges

↓

Amount is collected through the market/broker/exchange mechanism

↓

STT is deposited with the Government according to the prescribed mechanism

The exact STT charged can generally be seen in the broker's contract note.

7. STT Example – Equity Delivery Purchase

Suppose an investor purchases:

₹5,00,000 worth of equity shares

Assuming the transaction qualifies for delivery-based STT at 0.1%:

STT:

₹5,00,000 × 0.1%

= ₹500

Therefore, the STT on the purchase side would be ₹500.

If the shares are later sold for ₹6,00,000 and the applicable STT on the delivery sale is 0.1%:

₹6,00,000 × 0.1%

= ₹600

Total STT across these two transactions:

₹500 + ₹600

= ₹1,100

This is separate from other applicable transaction costs.

8. Example – Intraday Equity Trading

Suppose you purchase shares intraday for:

₹10,00,000

and sell them on the same day for:

₹10,10,000

For a qualifying non-delivery equity transaction, STT applies on the sell side at 0.025%.

STT:

₹10,10,000 × 0.025%

= ₹252.50

This illustrates why turnover matters greatly for active traders.

Even when the percentage looks very small, frequent high-value trading can generate substantial transaction costs.

9. Example – Futures Trading from 1 April 2026

Suppose the sale value of a futures transaction is:

₹20,00,000

Applicable STT:

0.05%

Calculation:

₹20,00,000 × 0.05%

= ₹1,000

Therefore, STT on the sale would be ₹1,000.

This is significantly different from calculations made using the earlier 0.02% rate.

10. Example – Options Trading from 1 April 2026

Suppose an option is sold and the relevant option premium for STT calculation is:

₹50,000

STT rate:

0.15%

Calculation:

₹50,000 × 0.15%

= ₹75

Therefore:

STT = ₹75

Notice that STT on an ordinary option sale is calculated with reference to the option premium, rather than simply applying the rate to the full notional contract value.

11. What Happens When an Option Is Exercised?

Exercised options require special attention.

From 1 April 2026, the applicable STT rate for the specified exercised-option transaction is 0.15% of the intrinsic price.

This can make the tax consequences of expiry/exercise materially different from simply closing an options position in the market.

Options traders should therefore understand:

• Expiry
• Exercise
• Settlement
• Intrinsic value
• Contract specifications
• STT implications

before allowing positions to expire.

12. Do You Pay STT Even When You Make a Loss?

Yes, potentially.

STT is transaction-based rather than a tax calculated solely on your net trading profit.

Consider:

Buy shares: ₹1,00,000

Sell shares: ₹95,000

Trading loss: ₹5,000

The fact that you suffered a loss does not itself eliminate the applicable STT.

This is one reason active traders should calculate net profitability after all transaction charges, not merely compare purchase and sale prices.

13. STT vs Brokerage

STT is not brokerage.

Brokerage is a charge levied by your stockbroker for providing trading services.

STT is a statutory tax.

A zero-brokerage or discounted-brokerage trading plan therefore does not necessarily mean zero transaction cost.

Even where brokerage is zero, other charges may still apply.

14. STT vs Other Stock-Market Charges

A typical contract note can contain several charges.

These may include:

Charge	Nature
Brokerage	Broker's charge
STT	Securities Transaction Tax
Exchange transaction charges	Exchange-related charge
GST	Goods and Services Tax on applicable services/charges
SEBI charges	Regulatory charge
Stamp duty	Statutory transaction-related duty
DP charges	May apply to applicable demat/depository transactions

Therefore:

Brokerage ≠ Total Trading Cost

Investors should always examine the complete contract note.

15. Does STT Apply on Both Purchase and Sale?

It depends upon the transaction.

Equity delivery

STT generally applies on both the purchase and sale sides at the applicable rate.

Intraday equity

STT generally applies on the sell side.

Futures

STT applies on the sale side.

Options

STT is generally payable by the seller on option premium for a sale transaction, while separate provisions apply when an option is exercised.

16. STT and Capital Gains

STT plays an important role in the taxation of certain equity capital gains.

For specified securities, the payment/applicability of STT can be relevant to the concessional taxation provisions governing:

• Short-Term Capital Gains under Section 111A
• Long-Term Capital Gains under Section 112A

Investors should therefore not treat STT merely as another small brokerage charge.

It can also be relevant to determining the applicable income-tax treatment.

17. Short-Term Capital Gains on STT-Paid Equity

For qualifying transfers covered by Section 111A, short-term capital gains on transfers on or after 23 July 2024 are generally taxable at 20%, subject to applicable provisions, surcharge and cess.

The earlier rate was 15% for qualifying transfers before that date.

This capital-gains tax is separate from the STT already charged on the transaction.

18. Long-Term Capital Gains on STT-Paid Equity

For qualifying long-term capital gains under Section 112A, the post-23 July 2024 framework generally provides for taxation at 12.5% on qualifying aggregate LTCG exceeding ₹1.25 lakh, subject to the applicable statutory conditions.

Again:

STT and LTCG tax are separate.

Paying STT does not mean that LTCG becomes automatically tax-free.

19. Can STT Be Deducted While Calculating Capital Gains?

Generally, STT paid is not allowed as a deduction while calculating capital gains from sale of securities.

This point is important because investors sometimes assume every stock-market charge shown on the contract note can automatically be deducted from sale consideration.

STT has specific tax treatment and should not be treated like ordinary brokerage for capital-gain computation.

20. Can STT Be Claimed as Business Expense?

This treatment can be different for a person carrying on securities transactions as a business.

Under the relevant provisions, STT may be allowed as a deduction where taxable securities transactions are entered into in the course of business and the corresponding income is included under:

Profits and Gains of Business or Profession

Therefore, tax treatment can differ between:

Investor

Income may be treated as capital gains.

Trader

Income may be treated as business income depending upon the facts and applicable tax rules.

This classification can materially affect the treatment of expenses.

21. Investor vs Trader – Why It Matters

Consider two taxpayers trading in the stock market.

Person A – Investor

Buys shares for long-term wealth creation.

Income is treated as capital gains where applicable.

Person B – Trader

Carries on share/F&O trading as business activity.

Income is reported under business/professional income where applicable.

Their treatment of STT and other expenses may not necessarily be identical.

Therefore, frequent traders should consult their Chartered Accountant or tax professional regarding proper classification and ITR reporting.

22. Where Can You Find STT Paid?

The easiest place is normally your broker's:

Contract Note

A contract note typically provides transaction and charge details such as:

• Security
• Quantity
• Buy/sell rate
• Transaction value
• Brokerage
• STT
• Exchange charges
• GST
• SEBI charges
• Stamp duty
• Net amount payable/receivable

Many brokers also provide annual reports containing consolidated trading and tax-related information.

23. Why Should You Preserve Contract Notes?

Contract notes are important financial records.

They can assist with:

• Capital-gain calculation
• Trading P&L reconciliation
• STT verification
• Brokerage verification
• Tax return preparation
• Accounting
• Tax audits
• Responding to tax queries
• Resolving broker disputes
• Verification of historical transactions

Investors and traders should maintain proper digital backups of these records.

24. STT and High-Frequency Trading

STT can become particularly important for active traders.

Suppose a trader makes a relatively small profit on each transaction but generates very high turnover.

Even small percentages applied repeatedly can materially affect profitability.

Therefore:

Gross Trading Profit

minus

Brokerage

minus

STT

minus

Exchange Charges

minus

GST

minus

SEBI/Regulatory Charges

minus

Stamp Duty

minus

Other Applicable Costs

=

Actual Trading Result before applicable income-tax adjustments

This is why professional traders generally analyse net returns, not just successful trades.

25. Can STT Turn a Profitable Trade into a Net Loss?

STT alone may not necessarily do so, but the combined transaction costs can turn a very small gross trading profit into a net loss.

For example:

Gross profit: ₹500

Brokerage: ₹100

STT: ₹150

Other applicable charges: ₹300

Total charges: ₹550

Net result:

₹500 − ₹550

= ₹50 loss

This is why very frequent low-margin trading requires careful cost analysis.

26. Does STT Apply to Every Investment?

No.

STT applies only to transactions falling within the statutory definition of taxable securities transactions.

Different products may have different taxation and transaction-charge structures.

Do not assume the equity delivery rate automatically applies to:

• Bonds
• Debt instruments
• Mutual funds
• ETFs
• Commodities
• Currency products
• Unlisted securities
• International securities
• Off-market transactions

The applicable security and transaction must be checked separately.

27. STT and Mutual Funds

STT treatment of mutual funds differs according to the type of fund and transaction.

For example, specified sales of units of equity-oriented funds may attract STT at applicable rates, whereas you should not assume the same treatment for every category of mutual fund.

Always identify:

1. Type of fund
2. Whether it qualifies as equity-oriented for the relevant provision
3. Mode of transaction
4. Applicable tax provision

before calculating STT.

28. Is STT Refundable?

STT should generally not be treated like TDS that you simply claim as tax credit/refund in your income-tax return.

TDS is tax deducted toward a taxpayer's income-tax liability.

STT is a separate transaction tax.

Therefore:

STT ≠ TDS

and

STT ≠ Advance Tax

The income-tax treatment of STT depends upon the nature of the securities activity and applicable provisions.

29. STT and ITR Filing

The correct ITR treatment depends heavily on whether your securities income is reported as:

• Capital gains
• Business income
• Speculative business income
• Non-speculative business income

The appropriate ITR form and schedules can therefore vary.

For example, an investor with qualifying capital gains may have different reporting requirements from an active F&O trader carrying on trading as business.

Do not select an ITR form solely because STT appears on your broker statement.

30. Common STT Mistakes

Mistake 1 – Using outdated STT rates

F&O rates have changed over time.

Always check the effective date.

Mistake 2 – Treating STT as brokerage

They are separate charges.

Mistake 3 – Assuming STT is charged only on profitable trades

STT can apply irrespective of whether the transaction makes a profit.

Mistake 4 – Deducting STT from capital gains without checking the law

STT is generally not deductible in computing capital gains.

Mistake 5 – Ignoring STT when calculating trading profitability

High turnover can make transaction costs significant.

Mistake 6 – Assuming delivery and intraday STT are identical

They are not.

Mistake 7 – Assuming futures and options have the same calculation base

They do not.

Mistake 8 – Ignoring exercised-option STT treatment

Exercise can have different implications from simply selling an option.

31. How to Verify STT Charged by Your Broker

If you suspect an incorrect STT amount:

Step 1

Download the relevant contract note.

Step 2

Identify the transaction type:

• Delivery
• Intraday
• Futures
• Options
• Exercised option
• Mutual fund transaction

Step 3

Check the transaction date.

This is extremely important because STT rates have changed over time.

Step 4

Identify the taxable transaction value.

Step 5

Apply the applicable STT rate.

Step 6

Compare your calculation with the broker's contract note.

Step 7

If there is still a discrepancy, contact the broker with the contract-note number and trade details.

32. Best Practices for Investors and Traders

1. Download and preserve contract notes.
2. Maintain annual broker tax reports.
3. Reconcile trading statements before filing ITR.
4. Use STT rates applicable to the actual transaction date.
5. Do not rely blindly on old online calculators.
6. Separate delivery and intraday trades.
7. Separate equity and F&O calculations.
8. Check expiry/exercise implications for options.
9. Calculate net profitability after all charges.
10. Keep accounting records if trading is conducted as a business.
11. Reconcile broker P&L with your own records.
12. Consult a qualified tax professional for classification and ITR treatment.

33. Quick Reference – STT 2026

Transaction	STT
Equity delivery purchase	0.1%
Equity delivery sale	0.1%
Equity intraday/non-delivery sale	0.025%
Equity-oriented fund delivery sale on exchange	0.001%
Sale of equity-oriented fund unit to Mutual Fund	0.001%
Futures sale from 01-Apr-2026	0.05%
Option sale from 01-Apr-2026	0.15% of premium
Exercised option from 01-Apr-2026	0.15% of intrinsic price

Important: Rates and provisions can be amended by future Finance Acts or notifications. Always verify the applicable rate for the transaction date.

34. Frequently Asked Questions (FAQ)

Q1. What is the full form of STT?

STT stands for Securities Transaction Tax.

Q2. When was STT introduced in India?

STT was introduced through the Finance (No. 2) Act, 2004.

Q3. Is STT charged when buying shares?

For qualifying delivery-based equity-share purchases, STT is applicable at the prescribed rate.

Q4. Is STT charged when selling shares?

Yes, STT applies to qualifying equity sales according to the applicable transaction category.

Q5. What is the STT rate for equity delivery in 2026?

For qualifying equity-share delivery transactions, the rate is 0.1% on purchase and 0.1% on sale.

Q6. What is STT on intraday equity?

For qualifying non-delivery equity transactions, STT is generally 0.025% on the sell side.

Q7. What is the STT rate on futures from 1 April 2026?

The applicable rate is 0.05% on sale of futures.

Q8. What is the STT rate on options from 1 April 2026?

STT on sale of an option is 0.15% of the option premium.

Q9. What is STT on exercised options from 1 April 2026?

The applicable STT rate is 0.15% of the intrinsic price, subject to the statutory provisions.

Q10. Do I pay STT if I make a loss?

Yes. Applicable STT can still be charged because it is transaction-based.

Q11. Is STT the same as brokerage?

No. Brokerage is charged by the broker, whereas STT is a statutory tax.

Q12. Is STT the same as capital gains tax?

No. They are separate.

Q13. Can I deduct STT while calculating capital gains?

Generally, STT is not allowed as a deduction while computing capital gains.

Q14. Can a trader claim STT as a business expense?

Where the statutory conditions are satisfied and the relevant income is included under Profits and Gains of Business or Profession, STT can be deductible under the applicable income-tax provisions.

Q15. Where can I see how much STT I paid?

Check your broker's contract note, transaction statement or applicable annual tax/P&L report.

Q16. Is STT charged on both sides of intraday trading?

For qualifying non-delivery equity transactions, STT is generally levied on the sell side.

Q17. Does zero brokerage mean zero STT?

No. Zero brokerage does not remove statutory STT.

Q18. Why is my STT higher than expected?

Possible reasons include high turnover, incorrect use of an old rate for comparison, transaction classification, derivatives exposure or exercised options. Verify the contract note and applicable rate for the transaction date.

Q19. Should I include STT when calculating my real trading return?

Yes. Trading performance should be evaluated after considering all applicable transaction costs.

Q20. Can STT rates change again?

Yes. Tax rates and rules can be changed through Finance Acts and other applicable legal provisions. Always verify current rules before making tax calculations.

35. Conclusion

Securities Transaction Tax may appear to be a small charge on an individual trade, but it can become significant for investors and especially high-turnover traders.

The most important points for 2026 are:

• Equity delivery STT remains relevant on both purchase and sale.
• Intraday equity has different STT treatment from delivery.
• Futures STT increased to 0.05% from 1 April 2026.
• Options sale STT increased to 0.15% of premium from 1 April 2026.
• Exercised options have separate STT treatment.
• STT can apply even when a trade results in a loss.
• STT is different from brokerage, GST and capital-gains tax.
• STT is generally not deductible in capital-gain computation.
• Different rules can apply where securities trading constitutes business income.

Investors and traders should therefore calculate returns based on net profit after transaction costs and maintain proper contract notes and broker statements for tax and accounting purposes.

Disclaimer

This article is provided for educational and general informational purposes only. Tax rates, securities laws, Finance Act provisions, Income-tax provisions and exchange-related rules may change from time to time.

The examples used in this article are simplified illustrations and should not be treated as investment, legal, accounting or tax advice.

Before filing an Income Tax Return, calculating capital gains, claiming expenses, classifying yourself as an investor/trader, or making financial or investment decisions, please verify the latest provisions with the Income Tax Department, applicable statutory authorities, your stockbroker, Chartered Accountant, tax consultant or other qualified professional.

The publisher/author does not accept responsibility for any loss, tax liability, penalty, trading loss or other consequence arising from reliance on this educational material.

 

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