STT or Securities Transaction Tax :
STT charges are the charges which are paid by Investors and Traders to central government, these charges are also known as regulatory charges. These charges are first introduced in financial year 2004-2005. This will leads to revolutionary change in trading in stock market also known as capital market as it is more tax efficient way of trading in stock market.
There are benefits of STT charges are that when STT is paid on Transactions then capital gain on stock market will be charged at favorable rates. As in case of short term capital gain tax rate @15% will be charged and for long term tax rate will be 0%. That means long term capital gains are exempted from taxes as STT is paid against the same.
in case STT is paid on transactions, capital gains on securities transactions get charged at a favored rate. In case of short term capital gains, a tax of 15% is applicable and in case of long term capital gains, the tax rate is 0% i.e. long terms capital gains is exempt from tax for transactions where STT is paid.
STT is collected by broker or broking firm with whom you have held your account. STT is applicable in value of transaction; in this section we will learn what amounts of charges are applicable on different type of trading will be in this article. There are 3 modes of doing transactions in capital market:-
1. Intraday Trading
2. Delivery based or BTST based trading
3. Future and options
1. Intraday Trades STT:
In Intraday Trades STT is charged on Sell Side of the Transaction and it is charged at 0.025%. There are no STT charges on buy value of stocks.
e.g. if you had bought 1000 shares of Tata Steel at 600 Rs/Share i.e. cost of acquisition will be 6,00,000/- now you sell them at Rs 625/- per share then selling will be of 6,25,000/- then STT will be charged at 6,25,000*0.025% i.e. 156.25 Rs.
2. STT Charges on delivery and BTST trading:-
As we had seen that in intraday trading STT is charged at selling side total cost only but in case of delivery STT will be charged at both sides of trading i.e. both at buying side and sell side of transaction. In Delivery or BTST cases STT will be charged at 0.1% on both sides.
Now lets take same example in which you had bought 1000 share of Tata Steel at 600/- Rs and sell them at 625 Rs/Share then STT charged on buy side will be 6,00,000*0.1%= 600/- and on sell side STT Charged will be 6,25,000*0.1= 625/-
3.STT on Future & Option Transactions:
(i) STT charges in case of Future Transactions:-
STT Charges on futures are 0.01% on sell side transaction value irrespective of whether it is intraday or positional trade.
Let’s make it clear with an example, If you buy future of Tata Steel at Rs .600/- per share for September month let lot size of Tata Steel future is of 500 shares then total cost of lot is 600*500= 3,00,000/- Rs, now if you sell the same at 700/-Rs/ Share then STT will be 700*500* 0.01= 35/- irrespective whenever you square off your positions.
(ii) STT Payable on Options Trading:-
STT charges in Options trading is 0.05% on sell side of Transaction value irrespective of whether it is intraday or positional trade.
Now lets makes it clear with an example Trader sells 1 lot of Calls on the NIFTY at Strike Price 9800 for Rs.300 each. Hence STT will be calculated as (Lot size of NIFTY)*Rs.300*0.05%.