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Glossary term

Securities Transaction Tax (STT)

Also called: STT, Securities Transaction Tax, Securities Transaction Tax STT, transaction tax, share transaction tax.

Securities Transaction Tax (STT) is a statutory tax the Government of India levies on purchases and sales of securities. It applies to trades on a recognised stock exchange. The NSE and BSE are among them. It covers equity shares, equity-oriented mutual funds and equity derivatives (futures and options). The exchange or clearing member collects it when the trade happens. It passes to the government. STT is one of several mandatory charges on top of brokerage.

Formula

STT = applicable STT rate x (turnover or premium or settlement value, as defined for that segment and side)

How it is read

STT is commonly read as a fixed regulatory cost. The amount depends on the segment. It also depends on whether the trade is intraday or delivery. For delivery-based cash equity, STT is typically charged on both the buy leg and the sell leg. For intraday, and for equity futures, it is typically charged on the sell leg only. For options, STT generally applies to the sell side. The basis differs for options that are exercised. The percentage rates are small. They still apply to the whole turnover. So traders usually look at STT as part of the total cost of a round trip. They do not look at it on its own. A charges or cost calculator is commonly used for this. It estimates the combined effect of STT, brokerage, exchange fees, stamp duty and GST. You can then compare the net outcome of a trade.

What it does not tell you

STT is a tax on the transaction. It is not a measure of profit, risk or the quality of a trade. A low STT does not imply a good outcome. A high STT does not imply a bad one. The exact rate, and the side it is charged on, differ by segment: cash delivery, cash intraday, futures and options. They are revised by the government from time to time. So any specific percentage should be confirmed against the current official schedule. It should not be assumed. STT is also distinct from capital gains tax, GST, stamp duty and exchange transaction charges. Seeing STT on a contract note says nothing about those other line items. The figure shown by a calculator is an estimate. It can differ from the broker's final billed amount.

See it in an experiment

Money and risk recap — What is model value, what is contract amount, and where is the risk boundary?

Track

What a trade has to clear

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Reference. Securities Transaction Tax Act, 2004 (Government of India) and NSE charges schedule.
The lesson that uses this term

The Charge Stack: What One Round Trip Actually Costs

A round trip is two transactions. Each one is charged. Brokerage is the line people quote. It is often the smallest. The statutory lines are set by rule, not by a broker. They are securities transaction tax, exchange transaction charges, the SEBI turnover fee, stamp duty, and the GST levied on top of some of those. They apply whether the trade worked or not. The total is small in rupees and large as a fraction of a small move.

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