Securities Transaction Tax (STT)
STT is the one trading cost you cannot negotiate. Since 1 April 2026 it is 0.05% on the futures sell side and 0.15% on option premium, and the exercise rule can quietly take more than the option is worth.
In short: Securities Transaction Tax (STT) is a central-government tax collected by the exchange on every trade in listed securities and settled through your broker. From 1 April 2026 the Finance Act 2026 raised the derivative rates: 0.05% of contract value on the sell side of futures, 0.15% of premium on the sell side of options, and 0.15% of intrinsic value when an in-the-money option is exercised at expiry. Equity delivery stays at 0.1% on both sides and intraday equity at 0.025% on the sell side.
The intuition
STT works like a toll on the road rather than a tax on the destination. It is charged on the value of the transaction, not on whether you made money, and it is collected at the moment of trade by the exchange and passed to the government through your broker. That is why it appears on your contract note next to brokerage and exchange charges, and why no trading style can avoid it. Because the rate is a percentage of value, it is small per trade and large in aggregate for anyone who turns their book over often.
The rates are set by Parliament in the Finance Act, not by SEBI or the exchanges. The exchanges only publish circulars implementing the change. The current table comes from the Finance Act 2026, which received assent on 30 March 2026, and NSE circular FATAX73524 of 31 March 2026 that applied it from 1 April 2026.
The rates in force (from 1 April 2026)
| Transaction | Rate | Charged on | Paid by |
|---|---|---|---|
| Equity delivery | 0.1% | Trade value | Buyer and seller |
| Equity intraday | 0.025% | Trade value | Seller |
| Futures (index and stock) | 0.05% (was 0.02%) | Contract value | Seller |
| Options, traded | 0.15% (was 0.1%) | Premium | Seller |
| Options, exercised at expiry | 0.15% (was 0.125%) | Intrinsic value | Holder of the in-the-money option |
Note the asymmetry that matters most to option traders: the writer pays STT on the premium when the option is sold, while the buyer pays nothing on entry and only pays if the option is exercised at expiry, and then on intrinsic value rather than premium. Selling the option back before expiry is a sale, so the buyer who closes early pays 0.15% of the premium received.
Formula
Traded option: STT = 0.0015 × premium × lot size × lots, on the selling trade only
Exercised option: STT = 0.0015 × (settlement price − strike) × lot size × lots for a call, and 0.0015 × (strike − settlement price) × lot size × lots for a put
Futures: STT = 0.0005 × futures price × lot size × lots, on the selling trade only
Worked example (illustrative prices)
Suppose NIFTY is at 24,000 and a trader buys one lot (65 units) of the 23,800 put for ₹215 a week before expiry, a premium outlay of ₹13,975. Three ways the trade can end:
| Exit | Taxable base | STT |
|---|---|---|
| Sells the put back at ₹300 | Premium received 300 × 65 = ₹19,500 | 0.15% = ₹29 |
| Holds; NIFTY settles at 23,500, put exercised | Intrinsic value 300 × 65 = ₹19,500 | 0.15% = ₹29 |
| Holds; NIFTY settles at 23,790, put exercised | Intrinsic value 10 × 65 = ₹650 | 0.15% = ₹1 |
In this example the amounts are tiny because the exercise base is intrinsic value, not notional. The trap is different: a barely in-the-money option that you let expire is worth almost nothing after the exchange settles it, while the premium a moment before close may have been higher. The tax is small; the forgotten time value is the real cost. See moneyness for why the last few points matter.
For the writer of that same put, STT was 0.15% of ₹13,975, about ₹21, charged on the day of writing. If the writer later buys the put back, there is no STT on that purchase.
A futures trader selling one lot of NIFTY futures at 24,050 pays 0.05% of 24,050 × 65 = ₹1,563,250, which is about ₹782, roughly two and a half times what the same trade cost before April 2026.
Why it matters
- It sets the floor for scalping. A futures round trip now carries 0.05% on the sell side before brokerage; a move of less than about 12 points on NIFTY futures does not cover it.
- It shapes the expiry-day decision. Squaring off an in-the-money option before 15:30 is taxed on premium; letting it exercise is taxed on intrinsic value. For deep ITM options the two bases converge, so the decision should rest on liquidity and time value, not on STT.
- Writers pay up front. Because the writer is taxed when the option is sold, a strategy with many short legs, such as an iron condor, carries STT on every leg written, whether or not it is later bought back.
- It is deductible as a business expense for traders who report F&O income as business income under the Income-tax Act, but it is not a tax credit; it reduces taxable profit, nothing more.
Common mistakes
- Quoting the old 0.1% option rate or 0.02% futures rate. Both changed on 1 April 2026.
- Believing the buyer pays STT on the premium. The buyer pays only on exercise (intrinsic value) or when selling the option back.
- Treating the exercise rate as applying to notional contract value. It applies to intrinsic value, the amount the exchange actually settles.
- Confusing STT with exchange transaction charges, SEBI turnover fees, stamp duty and GST, which are separate lines on the contract note and have their own rates.
Indian specifics
Rates are national and identical on NSE and BSE because they come from the Finance Act. The exchanges compute STT on the daily trade file and brokers debit it with the day’s settlement. On expiry day, NSE index options are settled at the exchange-computed closing value of the index (closing-auction based since August 2026; last-30-minute VWAP of continuous trading from 7 December 2026), so the intrinsic value base is known only after the close. Commodity derivatives on MCX attract CTT, not STT, at different rates. Stamp duty on F&O is a separate state levy collected under the Stamp Act and is charged on the buy side.
FAQ
What is the STT on options in 2026?
0.15% of premium on the sell side, and 0.15% of intrinsic value when an in-the-money option is exercised at expiry. Before April 2026 these were 0.1% and 0.125%.
What is the STT on futures in India now?
0.05% of contract value on the sell side from 1 April 2026, up from 0.02%.
Does the option buyer pay STT?
Not on entry. Only when selling the option back, or on intrinsic value if it is exercised at expiry.
Is STT charged on intrinsic value or contract value when an option is exercised?
On intrinsic value (settlement price minus strike, times lot size), not on the full contract value.
Can STT be claimed back?
No. It is not refundable, but traders reporting F&O as business income can deduct it as an expense.
Costs are only part of the picture
TradePulse shows the chain, open interest, IV and Greeks for every strike so the trade itself is sound before the cost of it matters.
Related terms
- Commodities Transaction Tax (CTT), the MCX equivalent
- Exercise, when exercise STT applies
- Moneyness, why barely-ITM options are a trap
- Premium, the base for the writer’s STT
- Cash settlement, how NSE settles index options
- Trading charges explained, brokerage, exchange fees, stamp duty, GST