Derivatives

How Securities Transaction Tax is levied

Bavadharini KS BL Research Bureau | Updated on July 17, 2021

The Securities Transaction Tax or STT is levied on every purchase and sale of securities listed on the stock exchange. Securities include equity, derivatives, unit of equity oriented mutual fund.

When it comes to equity, the calculation of STT is straight forward. Say, you bought 100 shares of X Ltd. at ₹50 and you sold it at ₹70. Then STT, for intra-day trade, will be charged at 0.025 per cent on the sell side. So, it will be levied on 100 shares at ₹70 per share which is around ₹1.75. For equity delivery, it is 0.1 per cent on buy and sell orders.

On the other hand, in the case of futures contract, STT for sale of futures in securities is 0.01 per cent on sell orders payable by the seller. And each futures trade is valued at the actual traded price. This means if you buy, say, 3 lots of futures (100 shares) of X Ltd at ₹1,000 and sell at ₹1,500 then your STT will work out to be ₹45 (1500*3*100*0.01 per cent).

When it comes to options, the STT is 0.05 per cent when sale of an option in securities, payable by the seller. Here the tax is calculated on the option premium. For instance, if you buy 5 lot of options contract (100 shares each) at ₹100 and sell it at ₹110 then your STT will work out to ₹27.5 (110*500*0.05 per cent).

In case of sale of an option in securities, where option is exercised, the STT is 0.125 per cent payable by the purchaser. Here the STT is calculated on the intrinsic value of the option on the expiry day.

Send your queries to derivatives@thehindu.co.in

Published on July 17, 2021

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