How the securities transaction tax is collected
The securities transaction tax or STT is levied on each purchase and sale of listed securities. Securities include stocks, derivatives, equity-focused mutual fund units.
In terms of equity, the calculation of the STT is straightforward. Suppose you bought 100 shares of X Ltd. at 50 and you sold them at 70. Then STT, for intraday trade, will be charged at 0.025% on the sell side. Thus, it will be levied on 100 shares at 70 per share, or approximately 1.75. For stock delivery, it is 0.1 percent on buy and sell orders.
In contrast, in the case of futures contracts, the STT for the sale of futures contracts is 0.01 percent on sell orders payable by the seller. And each futures transaction is valued at the actual price traded. This means that if you buy, say, 3 lots of futures contracts (100 shares) of X Ltd at 1,000 and sell at 1,500, then your STT will be 45 (1,500 * 3 * 100 * 0.01 percent ).
With regard to options, the STT is 0.05% on the sale of an option in securities, payable by the seller. Here the tax is calculated on the option premium. For example, if you buy 5 lots of option contracts (100 shares each) at 100 and sell them at 110, your STT will rise to ₹ 27.5 (110 * 500 * 0.05%).
If a security option is sold, when the option is exercised, the STT is 0.125 percent payable by the buyer. Here, the STT is calculated on the intrinsic value of the option on the day of expiration.
Send your questions to [email protected]