What is Securities Transaction Tax (STT) ?

If you are into stock market trading in India, you’ll often hear the term STT on your contract note.
Many beginners skip this detail, assuming it’s just another small charge. But over time, Securities Transaction Tax can make a visible dent in your profits — especially if you trade frequently.

So let’s break it down in the simplest way possible.

What Is Securities Transaction Tax (STT)?

STT is a tax charged by the Government of India on the purchase or sale of listed securities such as equity shares, equity derivatives, mutual funds, etc.
It is automatically applied to your trade and collected by the stock exchange.

Think of it like a toll you pay when you buy or sell certain market instruments.

Why Was STT Introduced?

The government wanted a transparent and traceable way to collect tax from market participants. Instead of lengthy paperwork or complicated reporting, STT ensures:

• Taxes are collected instantly during the transaction
• No tax evasion in market trades
• Better regulation and accountability

So, every time you place an eligible order, STT quietly gets added to your charges.

Where Does STT Apply?

STT is charged on the following instruments traded on Indian stock exchanges:

Instrument Type	Transaction	STT Applied
Equity Delivery	Buy & Sell	Yes
Equity Intraday	Only on Sell	Yes
Equity Futures	Only on Sell	Yes
Equity Options	On Sell of contract	Yes
Sale of exercised Options	Yes	Yes
Mutual Fund (Equity-oriented)	On Sale/Redemption	Yes

Note: STT is not charged on currency or commodity derivatives.

How Much STT is Charged?

Rates vary based on the product.
For example:

• Equity delivery trades attract STT on both buy and sell sides.
• For intraday trades, STT is charged only when you sell, not when you buy.

Because rates are reviewed periodically by the government, it’s always smarter to check your broker’s latest rate card.

How Does STT Impact Your Profit?

At first glance, STT might look tiny. But imagine trading multiple stocks daily — micro amounts add up quickly.
Here’s where you feel the impact:

• Your breakeven price shifts higher
• More trades mean more cumulative tax
• High-frequency strategies may see reduced profitability

If you’re a trader focused on margins, STT matters — a lot.

STT for Investors vs Traders

Type of Market Participant	Impact of STT
Long-term investors	Minimal impact due to fewer transactions
Intraday or derivatives traders	Higher impact due to frequent trades

So while long-term investors might barely notice this tax, active traders need to keep STT at the back of their mind every session.

Can You Save on STT?

There is no legal way to avoid STT, since it’s a mandatory tax.
However, being aware of how it is charged can help you choose the right trading style and instruments to breathe more profit into your trades.

Final Thoughts

STT is a small but significant part of your trading cost. Ignoring it is easy… until you look at your year-end P&L and see how those micro-taxes added up.

Knowledge is the first step toward smarter trading — now that you understand STT, you can manage your strategy better and keep your profits healthier.

FAQs on STT (Securities Transaction Tax)

Q1. Who pays STT in India?
Anyone who buys or sells taxable securities on Indian stock exchanges pays STT automatically.

Q2. Is STT charged on intraday trading?
Yes, but only on the selling side of intraday trades.

Q3. Do I need to pay STT separately?
No. It is auto-collected by the exchange and reflected in your contract note.

Q4. Why am I charged STT even on loss-making trades?
STT is charged on transactions, not on profit. Even if you lose money, the tax applies.

Q5. Is STT different from brokerage?
Yes. Brokerage goes to your broker. STT goes to the government.