Securities Transaction Tax (STT)

SECURITIES TRANSACTION TAX (STT) is applicable to the purchase or sale of equity shares, derivatives, units of equity-oriented funds through a recognised stock exchange in India or the sale of a unit of an equity-oriented fund to a mutual fund.

With effect from 1 June 2006, the STT is payable equally by the purchaser and seller at 0.125% of the transaction value on delivery based transactions. On non-delivery based transactions in equities or units of an equity oriented fund it is payable by the
seller at 0.025%. In case of sale of options in securities, STT is levied at the rate of 0.017% of the option premium to be paid by the seller. In case of sale of options in securities where the option is exercised, STT is levied at 0.125% of the settlement price and is paid by the purchaser. In case of sale of futures in securities, STT at 0.017% is to be paid by the seller. In the case of sale of units of an equity oriented fund to the mutual fund, it is payable by the seller at 0.25%.However, with effect from Oct 1,2009 STT will not be applicable in respect of transactions entered into by any person for or on behalf of New Pension System Trust.

The transaction value is determined as follows:

1. Options – Aggregate of strike price and premium of the option
2. Futures – the traded price
3. Other Securities – Sale/ Purchase Price

Sometimes to promote a security trading and to bring liquidity into the new products, government waive off the STT charges.

STT is to be collected by the Recognised Stock Exchange for taxable securities or prescribed person the mutual funds in case of sale of units to the mutual funds and paid to the Government. STT so paid is allowable as deduction in computation of taxable income under the head profits or gains from business or profession with effect from 1 April 2009.

Tags: STT Charges for Options, STT Charges in India, What is STT?