Thermodynamic Automaton Computer
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Founder, TWIST POOL Labs · TAC Research · NanoCERN Unit, Pune
First-principles finance educator · 10+ years in Indian capital markets
ORCID: 0009-0003-1953-7932Every time you buy or sell a stock on How BSE and NSE Work or How BSE and NSE Work, a small tax is automatically collected by your broker and remitted to the government. This is the Securities Transaction Tax (STT). It is silent, automatic, and often ignored — but it adds up sign…
Every time you buy or sell a stock on How BSE and NSE Work or How BSE and NSE Work, a small tax is automatically collected by your broker and remitted to the government. This is the Securities Transaction Tax (STT). It is silent, automatic, and often ignored — but it adds up significantly for active traders.
1. What is STT? (The One-Sentence Definition)
STT is a tax on the value of every securities transaction executed on a recognised Indian stock exchange — calculated as a percentage of transaction value and deducted at source by the exchange.
STT is not a capital gains tax. It is a transaction tax — it applies whether you make a profit or a loss.
2. STT Rates by Transaction Type (FY2025-26)
| Transaction Type | STT Rate | Applied On |
|---|---|---|
| Equity Delivery Buy | 0.1% | Transaction value |
| Equity Delivery Sell | 0.1% | Transaction value |
| Equity Intraday Sell | 0.025% | Transaction value |
| Futures (Index/Stock) Sell | 0.0125% | Transaction value |
| Options Buy | 0.0625% | Premium value |
| Options Sell | 0.0625% | Premium value |
| Equity Mutual Fund Sell | 0.001% | Transaction value |
Budget 2024 change: STT on futures was increased from 0.0125% to 0.02% and on options from 0.0625% to 0.1%. Verify current rates in your broker’s contract note.
3. STT in Practice — What It Costs You
Example: Equity delivery trade
You buy 100 shares of Reliance at ₹2,800 and sell at ₹2,950.
- Buy STT: 100 × ₹2,800 × 0.1% = ₹280
- Sell STT: 100 × ₹2,950 × 0.1% = ₹295
- Total STT: ₹575
Your gross profit: ₹15,000. After STT: ₹14,425. Plus brokerage, exchange charges, and GST on brokerage.
For active intraday traders, STT is one of the largest cost components — often exceeding brokerage.
4. Is STT Deductible?
For investors (delivery-based trades): STT paid on equity transactions is NOT deductible while computing capital gains tax. You cannot subtract STT from your gain to reduce the taxable capital gain.
For traders (F&O, intraday): If trading income is declared as business income, STT can be claimed as a business expense in ITR-3.
5. STT vs Capital Gains Tax in India Tax — They Are Independent
Many beginners assume that STT is the “tax” on stock market profits. It is not. STT is paid on every transaction regardless of profit or loss. Capital gains tax is separately owed on net profits at the end of the financial year.
Both are owed. Neither offsets the other.
The Smart Friend’s Verdict
STT is unavoidable if you trade on Indian exchanges. Active traders must factor STT into every trade’s break-even calculation. The break-even for a delivery trade is NOT at zero — you need to cover the 0.2% round-trip STT + brokerage before you make a rupee of profit.
For long-term investors, STT is a minor cost amortised over years. For intraday and F&O traders, it is a significant drag that must be accounted for in strategy design.
Back to Capital Gains Tax for the complete tax framework.
Frequently Asked Questions
STT is not a capital gains tax. It is a transaction tax — it applies whether you make a profit or a loss.
You buy 100 shares of Reliance at ₹2,800 and sell at ₹2,950. See the full explanation in the section above. Many beginners assume that STT is the “tax” on stock market profits.
Transaction Type
STT Rate
Applied On
Equity Delivery Buy
0.1%
Transaction value
E