Glossary
What is STT (Securities Transaction Tax)? Meaning, Example & Why It Matters
A tax collected by the government on the value of securities you buy or sell on a recognised stock exchange.
Securities Transaction Tax, or STT, is a direct tax the government levies on trades in listed securities such as shares, equity ETFs, futures and options. Your broker collects it on each trade and passes it to the government. The rate depends on the segment and whether you are buying or selling, and it is calculated as a small percentage of the trade value or option premium.
Why STT matters to you
STT cannot be avoided by switching brokers, since every broker must charge the same statutory rate. For active traders, especially in futures and options, STT can be one of the largest costs on the bill, often larger than brokerage. The government has revised STT rates on F&O in recent budgets, so older numbers you read online may be out of date.
STT is also relevant for taxes. For many equity trades, paying STT is linked to how capital gains are taxed, and for traders treating trading as a business, STT paid may be treated differently in tax computation. Rules here can be nuanced, so consult a qualified tax professional for your situation.
Practical tip: always check STT on your contract note rather than estimating it. Rates change; check the latest exchange circular or Union Budget notification before relying on any figure, and use an up-to-date calculator when planning trades.
See it in rupees: every charge and tax on a real trade, at every broker. Open the brokerage calculator
Related terms
- GlossaryStamp Duty
A statutory charge levied on the buy side of securities transactions, collected through your broker.
- GlossaryExchange Transaction Charges
Fees charged by stock exchanges like NSE and BSE on the value of trades executed on their platform.
- GlossaryContract Note
A legal document your broker sends after each trading day listing every trade, its price and all charges.
- GlossaryF&O (Futures and Options)
The derivatives segment where traders buy and sell futures and options contracts based on stocks or indices.
Frequently asked questions
Is STT the same for all brokers?
Yes. STT is a statutory tax set by the government, so every broker charges the same rate for the same type of trade.
Is STT charged on both buy and sell?
It depends on the segment. In some segments it is charged on both sides, in others only on the sell side. Check the current rules for each segment.
Can I claim STT as an expense?
This depends on how your income is classified for tax purposes. Speak to a tax professional for advice on your specific case.