Securities transaction tax (STT)

STT is a tax the government charges on every purchase and sale of shares on a stock exchange. On delivery trades it is 0.1% of the buy value and 0.1% of the sell value. On intraday trades it is 0.025% of the sell value only. Your broker collects it on the contract note.

STT is usually the largest charge on a delivery trade, larger than brokerage at any discount broker. It is the same at every broker, because the rate is set by law.

For tax, STT cannot be deducted when you work out capital gains on shares. If your trading is taxed as business income, as intraday trading is, STT counts as a business expense.

Example. A ₹1 lakh delivery buy sold at the same price pays ₹100 of STT on the buy and ₹100 on the sale, ₹200 in all. The same trade done intraday pays ₹25.