Securities Transaction Tax (STT) is a direct tax levied on the purchase and sale of securities (stocks, equity mutual fund units) — collected at the point of transaction.
STT is a small levy charged at the time of buying or selling equity securities and equity mutual fund units on a recognised exchange or through an AMC. Rates vary: equity delivery purchase: 0.1%, equity delivery sale: 0.1%, equity fund redemption: 0.001% (as of current rates). STT is automatically deducted by the broker or fund house and is shown in transaction confirmations. For mutual fund equity redemptions, STT is negligibly small. STT paid is deductible from business income but not from capital gains calculations for individual investors.
Every time you buy or sell equity — stocks or equity mutual fund units — a tiny tax is automatically collected. It's so small for mutual funds (0.001% on redemption = ₹1 per ₹1 lakh redeemed) that most investors don't notice it. For direct equity traders buying and selling frequently, STT can accumulate significantly. For buy-and-hold mutual fund investors, it's negligible.
Mutual fund equity redemption: 0.001% STT on redemption value — ₹10 per ₹10 lakh redeemed.
Equity delivery (stocks): 0.1% on buy and sell each.
STT is collected at source — you don't need to calculate or pay it separately.
Not applicable to debt fund transactions.