Securities Transaction Tax (STT)

Securities Transaction Tax is a type of direct tax payable in India on the value of taxable securities transacted through a recognized stock exchange. Securities transaction tax, commonly known as STT, was introduced in the Budget of 2004 and enforced from October 2004. The primary aim of implementing STT was to prevent tax evasion. It is a turnover tax where the investor is liable to pay a specified tax on the total consideration paid or received in a securities transaction. Stocks, options, futures, mutual funds, and exchange-traded funds fall under STT.

What Securities Are Subject to STT?

Securities Transaction Tax is applicable to the following securities, as defined by the Securities Contracts (Regulation) Act:

Shares, bonds, debentures, debenture stock, or other marketable securities, scrips, stocks of a similar nature in or of any incorporated company or body corporate
Derivatives
Units or any other instrument issued by any collective investment scheme to the investors in such schemes
Security receipts 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
Rights or interests in securities
Equity-oriented units of mutual funds
Securitized debt instruments

Note that STT is not applicable in the case of off-market transactions.

Securities Transaction Tax Rates

Particulars	STT Rate	Value on Which STT is Paid
Purchaser or seller of equity shares on purchase or sale through a recognized stock exchange	0.1%	Value of buy or sale of the security
Purchaser of an equity-oriented unit of mutual fund	0.1%	Buying value of equity-oriented unit of mutual fund
Seller of an equity-oriented unit of mutual fund	0.025%	Sale value of an equity-oriented unit of mutual fund
Option contract (seller) – Sale through a recognized stock exchange	0.017%	Value of option premium received
Option contract (seller) – If exercised by a buyer through a recognized stock exchange	0.125%	Value of settlement price received
Futures – Sale through a recognized stock exchange	0.01%	Value of sale of future in securities
Mutual fund – Sale of equity-oriented unit through a recognized stock exchange	0.025%	Value of sale of an equity-oriented unit of mutual fund

STT Due Date & Return Filing

Individuals liable to pay Securities Transaction Tax must deposit it by the 7th of the month following the month in which it is collected/deducted. Additionally, recognized stock exchanges must file an annual return in the prescribed format by 30th June of the financial year following the collection of STT. Furthermore, all recognized mutual funds must also file an annual return within similar timelines.

STT Treatment under Income Tax

The treatment of STT under Income Tax varies by classification. If the purchase of shares is considered an investment, the income from securities is taxable under the head ‘1’. Alternatively, if treated as a business activity, it falls under Profits and Gains of Business or Profession.
If taxable under ‘Income from Capital Gains’, gain or loss on securities sale is taxed as Short-Term or Long-Term Capital Gain based on the holding period.
A holding period under a year leads to Short Term Capital Gain, taxed at 15%, provided the shares were sold through a recognized stock exchange with STT paid.
A holding period over a year constitutes Long Term Capital Gain, taxed at 10% under similar conditions.
If taxable under ‘Profits and Gains of Business or Profession’, income from such sales is taxed at the regular rate, with STT paid on these shares deductible under section 36 of the Income Tax Act, 1961.

For more information on related taxes, learn about the commodities transaction tax. Also, explore the latest amendment rules for securities transaction tax.

For those interested in alternative investment schemes, the USTTAD Scheme may be of interest.

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Frequently Asked Questions

Common questions about Securities Transaction Tax India.

Securities Transaction Tax (STT) is a direct tax payable in India on the value of taxable securities transacted through a recognized stock exchange. It is a turnover tax where the investor is liable to pay a specified tax on the total consideration paid or received in a share transaction.

STT is applicable on shares, bonds, debentures, derivatives, units of mutual funds, securitized debt instruments, government securities of equity nature, and rights or interests in securities traded through a recognized stock exchange.

STT is calculated as a percentage of the value of the securities transaction. The rates vary based on the type of security and the nature of the transaction (purchase, sale, options, futures, etc.).

STT was introduced in the Budget of 2004 and was made applicable from October 2004. Its main objective was to avoid tax evasion in securities transactions.

No, STT is not applicable for off-market transactions. It is only levied on transactions carried out through recognized stock exchanges.

The buyer or seller of the securities, depending on the type of transaction, is responsible for paying the applicable STT.

STT is required to be deposited by the recognized stock exchange or mutual fund on or before the 7th of the month following the month in which the STT was collected or deducted.

The treatment of STT under Income Tax depends on whether the securities are held for investment or business purposes. If held for investment, the gains or losses are taxed as capital gains. If held for business, the income is taxed as business income, and STT paid is allowed as a deduction.

No, there are no specific exemptions or deductions available for STT. However, STT paid can be claimed as a deduction from taxable income if the securities are held for business purposes.

Recognized stock exchanges and mutual funds are required to file annual returns for the STT collected or deducted by June 30th of the following financial year.