Securities Transaction Tax (STT) - the biggest tax applied on your trading

Posted on 6th Mar 2017
by Admin


Need help choosing a broker?

Name Phone
Email City
State

Securities Transaction Tax (STT) was introduced by Finance Minister P Chidambaram in the Union Budget 2004-05. STT is levied on every purchase or sale of securities that are listed on the Indian stock exchanges. This would include shares, derivatives or equity-oriented mutual funds units. The rate of tax that is deducted is determined by the central government, and it varies with different types of transactions and securities. The tax is deducted at source by the broker at the time of the transaction itself which goes to the exchange from the broker to pay to the Income Tax Department of India.

STT Charges for trading in different segments in India

STT is applied on the value of transactions and charged to traders/investors in the contract notes issued by your Broker. Since brokers have to automatically add this tax to the transaction price, there is no way to avoid it. 

Your contract note specifically shows each and individual charges like STT, Exchange Transaction Charges ,SEBI Charges, Service Tax (Brokerage + Exchange Transaction Charges), Stamp Duty along with brokerage.

  • STT on Equity Delivery Trades: Rs 10,000 per Crore or 0.1% per volume on buy and sell both sides.

  • STT on Equity Intraday Trades: Rs 2,500 per Crore or 0.025% per volume on sell side only and is valued at the actual traded price.

  • STT on Equity Futures Trades: Rs 1,000 per Crore or 0.01% per volume on sell side only and is valued at the actual traded price.

  • STT on Equity Options Trades: Rs 5,000 per Crore or 0.05% on sell side only on premium value.

  • STT on Exercised Options on Expiry: Equity Options on Exercised and Assigned Trades - Rs 12,500 per Crore or 0.125% on notional values of trades.

Key Points to be noted about STT and CTT:

  • Since STT is paid on transactions, capital gains on securities transactions get charged at a preferential rate. In case of short term capital gains, a tax of 15% is applicable.
  • Long terms capital gains is exempt from tax for transactions where STT is paid.
  • Same as STT is applicable for trading in securities, Commodity Transaction Tax CTT is applicable for trading in non-agro commodity derivatives.
  • CTT is not applied on certain agro commodities but it is applied on all non- agro commodities like gold, silver and non-ferrous metals such as copper and energy products like crude oil and natural gas.
  • STT is not charged on bonds and currency.

Save Yourself from the STT Trap in Options

Options Traders must be careful about STT trap on Index options like Nifty options and Bank Nifty Options and also while trading stock options.  If you square up your position before the contract expires, then STT will be charged only on the premium you paid but if you do not sell this position and let it exercise, STT will be levied on settlement price on the day of exercise.

Assume, you have bought Nifty Options of Strike Price 8700 @ Rs 100 per lot. You will not be charged any STT as STT is applicable only on the selling side.

One Nifty lot is currently 75 units. So, If you sell that position @ Rs 100 itself, then you will be charged Rs 3.75 ((100*75*0.05%) as STT. STT for selling options is 0.05% on the premium amount.

But, if you carry your option till expiry and your in-the-money option gets exercised, then you will be charged 0.125% STT of the ENTIRE CONTRACT VALUE.

This means, if you had bought 1 lot of Nifty 8700 options at Rs 100 and didn’t sell it but let it get exercised on the last day of the contract i.e. the expiry day and if Nifty closed at 8706 on expiry day and your option ends up in the money then, you will be charged a STT of Rs 816 approx. ((8706*75)*0.125%). In such case, if you buy more lots, then your STT will increase many folds, sometimes even way bigger than your profit.

Instead, had you sold it on the exchange then you would have been charged STT of 0.05% only on premium value.

It is in your best interest and also advised from your broker to square off your in-the money i.e. ITM options expiring today to save yourself from the STT Liability!

How to reduce STT charges in option trading?

Since STT is applied on the value of transaction and the rates are defined by the Government of India, there is no way you can reduce your STT charges. Only thing to keep in mind is if you are an option trader, then square off your position before expiry. That way you will not end up paying STT on the whole contract value for that day.

Is STT charges differ for different brokers?

Regardless of the broker you choose for your trading needs, STT applied to your trade will be the same. However choosing the Discount Stock Brokers like ProStocks, Zerodha, UpStox(RKSV) will give a tremendous amount of saving in your brokerage which will help you keep your trading cost low and thus making more profit.

How to calculate STT on any trade done by me?

The easiest way to calculate the STT and other charges is to use the Brokerage Calculator on our website or any broker’s website like ProStocks Brokerage Calculator.

SAVE 70% ON YOUR BROKERAGE

NamePhone
EmailCity
State
Are you a day trader?

Enquire Trading Account:

Name:Phone:
Email:City:
State:
Are you a day trader?


User Comments

avatar
  2017-03-06T13:28:02+00:00

Guaranteed Save 60% to 90% Brokerage + Taxes

ProStocks, The Flat Rate Discount Stock Broker

Fix Price - Rs 15 Per Trade


Rs 899/Month,8999/Year for
Equity Cash and F&O

Rs 499/Month,4999/Year for
Currency Derivatives

Lowest Transaction Charge
Lowest Call & Trade Fee
Lowest Stamp Duty

Get FREE Trading + Demat Acct

Zerodha  Zerodha

Free Delivery trading

Max Rs 20 Per Trade for F&O

zerodha

Sharekhan

Beginner, seasoned investor, active trader or HNI. Get customised solutions.

Rs 0 account opening fee on Online Trading and a Demat Account
(Rs 1150 waived)

sharekhan

angel-broking  Angel Broking

Free Equity Delivery Trades
Flat 20% discount on online transaction

angel-broking



Sub brokers by name

Hyderabad Rajkot Chennai Jaipur

Sub brokers by name

Indore Lucknow Nagpur Ludhiana

Sub brokers by name

Allahabad Kanpur Patna Ernakulam



Search topsharebrokers.com:

Translate topsharebrokers.com: