What is STT? Meaning, Full Form, Applicability, Charges

If you invest in Indian stock markets, whether through shares, derivatives, or equity mutual funds, you’ve probably seen STT show up in your contract note. While it’s a small amount per trade, understanding what STT is, where it applies, and how it affects your taxes is important for accurate return and cost calculations.

This guide explains the STT meaning, full form, applicability, charges, and whether interest or penalties apply, in simple terms.

What is STT?

STT stand for Securities Transaction Tax, is a direct tax levied by the Government of India on certain securities transactions carried out on recognised stock exchanges like NSE and BSE.

It differs based on the nature of security. 

STT Charges Across Different Market Segments

STT rates vary depending on the type of trade. Below is a simplified overview, as per the latest Union Budget 2026. 

STT is charged at the time of buying or selling securities and is automatically deducted by the broker or exchange. Investors and traders do not need to calculate or pay STT separately.

STT Full Form (Short Form of STT)

The full form of STT is:

Securities Transaction Tax

STT was introduced in 2004 through the Finance Act with the objective of simplifying securities taxation and ensuring better compliance in capital market transactions.

Why Was STT Introduced?

The government introduced STT to:

• Simplify tax collection on securities transactions
• Ensure transparency and reduce tax evasion
• Make capital market taxation easier to administer
• Replace complex reporting of short-term trading profits

By collecting tax at the transaction level, STT ensures easy and automatic compliance.

Where is STT Applicable?

STT is applicable only to transactions carried out on recognised stock exchanges in India.

It applies to:

• Equity delivery trades
• Equity intraday trades
• Equity futures
• Equity options
• IPO transactions (equity shares)

STT is not applicable to:

• Commodity trading
• Currency derivatives
• Off-market equity transactions

Who Pays STT?

STT is paid by:

• Buyers and/or sellers, depending on the transaction type

However, practically:

• STT is automatically deducted by the broker
• The broker deposits it with the government
• Investors and traders do not need to pay STT separately

STT and Capital Gains Tax

STT plays an important role in how equity gains are taxed:

• For equity delivery trades, payment of STT is a condition for:
• Long-Term Capital Gains (LTCG) tax benefits
• Short-Term Capital Gains (STCG) classification

If STT is paid:

• STCG (≤ 12 months): Taxed at 20%
• LTCG (> 12 months): 12.5% on gains above ₹1.25 lakh

Intraday trades and F&O trades are treated as business income, not capital gains.

Can STT Be Claimed as an Expense or Deduction?

This depends on whether you are an investor or a trader:

• Investors (equity delivery):
• STT cannot be claimed as a deduction
• It is not allowed as an expense under capital gains
• Traders (intraday / F&O):
• STT can be claimed as a business expense
• It reduces taxable business income

How STT Appears in Your Trading Statement

STT is clearly shown in:

• Contract notes
• Daily trading statements

It appears as a separate line item under statutory charges and is included in total transaction costs.

STT vs Other Trading Taxes

STT is often confused with other charges. Here’s how it differs:

• STT: Government tax on securities transactions
• GST: Applied on brokerage and service charges
• Stamp Duty: State-level tax on contract value
• Capital Gains Tax: Tax on profits earned

Each of these is separate and serves a different purpose.

Common Misconceptions About STT

• STT is not refundable
• STT is not applicable to commodity trading
• STT is different from capital gains tax
• Paying STT does not exempt you from income tax reporting

Conclusion

STT (Securities Transaction Tax) is a mandatory tax on securities transactions in India and an important component of trading costs. While it is automatically deducted and simple to comply with, understanding STT helps investors and traders accurately calculate returns and tax liabilities.
Knowing where STT applies—and where it doesn’t—can help you plan trades better and avoid confusion during tax filing.