Securities Transaction Tax (STT), is the tax deduction that is applied to all your equity transactions. Introduced in the 2004 Union Budget by the then Finance Minister Mr. P Chidambaram, the deduction is to ensure that gains arising from securities transaction are taxed at source, thus preventing individuals from evading capital gains tax. So, what is the applicable STT and when do you pay it? Read on to know it all.

When Does One Pay STT?

Securities Transaction Tax is levied on every purchase or sale of securities that are listed on the recognized stock exchange. 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. Deducted at source by the broker or AMC, at the time of the transaction itself, the net result is that it pushes up the cost of the transaction done.

Scope of STT

As per of the Securities Contracts (Regulation) Act, 1956, STT would be applicable for securities of the following nature.

  • Shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate.
  • Derivatives
  • Units or any other instrument issued by any collective investment scheme to the investors in such schemes
  • Security receipt as defined in section 2(zg) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
  • Government securities of equity nature
  • Such other instruments as declared by the Central Government
  • Rights or interest in securities
  • Equity-oriented mutual funds

STT is not applicable for any off-market transaction.

Applicable STT

The rate of STT varies according to the type of security and type of transaction. The applicable STT for the current assessment is as follows.

Type of Securities Types of transaction Applicable STT
Equity shares Purchase or sale through recognized stock exchange 0.1%
Equity oriented unit of mutual fund Sale 0.025%
Equity oriented unit of mutual fund Purchase 0.1%
Future option Sale 0.01%
Option contract Sale 0.017%

Due date of payment of STT –

STT needs to be deposited by 7th of the month following the month in which STT is collected or deducted.

Filing of Return –

Recognized stock exchange / mutual fund is required to file annual return in prescribed format on or before 30th June of the Financial Year succeeding the Financial Year in which such STT has been collected or deducted.

STT and Capital Gains Tax on Securities

The short term capital gain arising from the sale of shares or equity oriented mutual fund units, on which STT has been applied, would be taxed at the rate of 15%. Long term capital gains, of such similar transactions which have been subject to STT, would be taxed at the rate of 10%.

Source: InvestmentYogi is one of the leading personal finance websites in India

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  1. gouse pasha says:

    Whether STT , Service Tax, Turnover Tax,Sebi Tax, Stamp duty can be deducted from the capital gains to arrive at taxable income?

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September 2021