Securities Transaction Tax (STT) and Commodities Transaction Tax (CTT) are government taxes collected on the trade itself, at the moment it happens. STT applies to trades in securities on stock exchanges; CTT is its cousin for commodity derivatives. You never file or pay these separately. They are collected at source on every applicable trade and passed on to the government.
How is STT collected if I never pay it directly?
It is built into your contract note. When Arjun buys shares of Sundar Textiles, the exchange calculates STT on the trade, Rupeezy collects it along with the trade value, and it is remitted onward. It works like the tax component on a bill: automatic, unavoidable, and already settled by the time the trade is done. STT appears as its own line in the charges on your contract note, alongside brokerage and exchange fees. The charges article walks through every line.
Where does STT apply, and on which side of the trade?
STT applies at different points depending on the segment, each at the rate that currently applies to that segment:
| Segment | When STT is charged |
|---|---|
| Equity delivery | On both the buy and the sell |
| Equity intraday | On the sell side only |
| Futures | On the sell side only |
| Options | On the sell side (on premium); differently again if a bought option is exercised |
Two practical consequences follow. First, delivery investors pay STT twice per round trip, once on each leg. Second, option buyers who let in-the-money options go to exercise can face STT computed on the settlement value rather than the small premium. One reason many traders square off positions before expiry rather than letting them run.
The rates themselves are small fractions of trade value, set by the government and revised from time to time in the Budget, so we deliberately do not quote them here. Your contract note always shows the actual amount charged.
What is CTT, then?
CTT is the same idea applied to commodity derivatives, futures and options on commodities traded on exchanges such as MCX. It generally applies to the sell side of non-agricultural commodity derivatives, such as gold, silver, crude oil and base metals, at the rate that currently applies; most agricultural commodity contracts are exempt, a deliberate policy choice to keep hedging cheap for farm-linked users. New to this segment? Start with what commodity trading is.
Does paying STT change how my profits are taxed?
Yes, in one important way. The concessional tax treatment of short-term and long-term capital gains on listed equity is available because the trades suffered STT. That is the quiet bargain behind the tax: you pay a sliver on every transaction, and in exchange, gains on exchange-traded equity get preferential rates compared with, say, property.
For traders reporting business income, STT and CTT paid are part of the cost of doing business and can be claimed as expenses against trading income.
Things to keep in mind
- STT and CTT are charged per trade regardless of whether the trade made money. Frequent trading means paying them frequently.
- Check your contract note; the exact STT or CTT on each trade is always itemised there.
- Rates differ by segment and by side of the trade, and the government revises them. Never assume last year's rate.
- Options exercise can attract STT on settlement value; know the rule for your contract before letting it expire in the money.
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