What Is STT (Securities Transaction Tax) in India?
STT stands for Securities Transaction Tax. It is a small tax charged on every trade in listed securities — shares, equity mutual funds, and derivatives — on recognised Indian exchanges. It is collected automatically by the exchange through your broker, so you never pay it separately.
How STT differs from capital gains tax
STT is a transaction tax — it applies to the trade itself, whether you profit or not. Capital gains tax applies only to your profit when you sell. Both can apply to the same sale.
Where the rate varies
- Delivery equity trades are charged STT on both buy and sell.
- Intraday trades are charged a lower rate, only on the sell side.
- Futures and options have their own rates, with options charged on the premium (and on the settlement value if exercised).
Exact rates change in the Union Budget from time to time, so always check the current schedule. The key idea: STT is a per-trade cost you factor into net returns, separate from the capital-gains tax on your profit.
Why it matters for net returns
For high-frequency or intraday strategies, STT and other transaction costs can eat meaningfully into gross returns. When you backtest against historical price data, model STT and brokerage so your simulated P&L reflects reality.