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Securities Transaction Tax or STT is a tax being levied on all transactions done on the stock exchanges at rates prescribed by the Government of India.
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Securities Transaction Tax (STT) is a tax being levied on all transactions done on the stock exchanges at rates prescribed by the Central Government from time to time. STT was introduced in the Finance Act 2004 and change multiple times after that.
The STT Rate differs based on the products segment (i.e. Eq Delivery, Eq Future etc) and transaction type (buy, sell).
The brokerage, service tax and STT are indicated separately in the contract note.
Securities Transaction Tax is collected by exchange from the broker on behalf of the client and paid to the Income Tax Department of Government of India. STT is charged based on the segment and transaction type at the rate described below (as of Feb 2017).
Segment | STT | Transaction |
---|---|---|
Equity Delivery | 0.1% | Both Buy and Sell |
Equity Intraday | 0.025% | Sell Side |
Equity futures | 0.01% | Sell Side |
Equity options | 0.05% | Sell Side (on Premium) |
Currency futures | No STT | |
Currency options | No STT | |
Commodity futures | 0.01% | on Sell Side (Non-Agri) |
Commodity options | 0.05% | on Sell Side |
Securities Transaction Tax Rates Explained
Brokerage calculator offered by online stocks broker helps understanding the STT investor pays for the security transaction. As the rate of STT is the same, you could check the brokerage calculator on any online broker website. i.e. ProStocks Brokerage Calculator(ProStocks is a Mumbai based discount broker offering trades at Rs 15 per trade.)
India taxes equity futures and options as well as the underlying shares. Futures are taxed based on their delivery price, while options are taxed both on the premium and on the strike price if exercised.
USA (in 1966), Germany(1991), Japan (1999), Australia (2001), France (2009), Canada, Mexico eliminated its stock transaction tax. This has boosted market participation and volumes significantly in these markets.
It has been observed consistently that STT along with capital gains tax (CGT) distort trading relative to a tax-free market.
India is among the countries with the highest taxes in stock markets. Other then brokerage, the investor pays taxes:
CGT is tax by Government of India on capital gains. India has two types of capital gain taxes:
Investor holds an exchange-traded stock, ETF or bond for less than 12 months before selling it. STCGT is charged at 15% tax under Section 111A of the Income Tax Act. The debt-oriented mutual funds don't come under Section 111A and the income through them goes to the regular income.
Investor holds an exchange-traded stock, ETF or bond for over 12 months before selling it. As per 2018 tax law, LTCGT is charged at 0%, 15% and 20%, depending on your income.
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