Securities Transaction Tax (STT) might look like a minor fee at first glance, but for intraday traders, it quietly shapes the final profit more than most notice. Since intraday trades are frequent and fast-moving, even a small percentage on each exit order can significantly affect overall returns.
STT, or Securities Transaction Tax, is a government-charged tax applied to the stock values traded on recognised stock exchanges in India. It’s a built-in fee on every market transaction. Many traders focus on charts, volume, and price moves, yet the real money picture becomes clear only when STT is added to the equation.
This guide gives a simple breakdown of STT charges on intraday, what it is, how it’s charged, its impact on profits, and how to estimate true trading costs before placing a trade.
What is STT in Intraday Trading?
STT in intraday trading is a built-in tax that the government applies to the value of stock transactions. Since intraday positions are bought and sold within the same day, STT is charged only on the sell side.
The STT rate on intraday trading is 0.025% of the total sell value, and the brokers automatically deduct it during the trade. It might be seen as a tiny charge for active or high-volume traders, but it adds up quickly and can noticeably reduce the overall profitability.
For example, a trader buys 400 shares at ₹120 and later sells those same 400 shares at ₹124 within the day. The calculation begins by calculating the average price as = [(400 x ₹120) + (400 x ₹126)]/ 800 = ₹123
As we know, STT applies only on the sell side,
STT = 400 shares x ₹123 x 0.025% = ₹12 approximately
It is a small number on paper, but it still counts toward the final intraday cost.
How STT Charges Are Applied in Intraday
- Rate: The STT rate for intraday equity trades is 0.025% of the total sell value.
- Applicability: It’s charged only when the traders sell, and not when they buy.
- Collection: The broker auto deducts it the moment the sell order goes through, and it shows up on the contract note.
- Mandatory: It’s a government tax that the traders can not skip or avoid on the recognised exchanges.
- Irrespective of Profit or Loss: STT applies irrespective of whether the trade ends in a gain or a loss, and it’s charged on the transaction value itself.
STT Rate for Intraday Trading (Latest Update)
The STT rate for intraday equity trades in India is currently at 0.025% on the sell-side transaction value. This rate remains in place before and after the latest updates, effective from 1 October 2024.
STT Charges Comparison: Intraday vs Delivery vs Futures vs Options
| Transactions | Rates | Payable by |
| Intraday | 0.025% | The seller, on the value of the stock being sold |
| Delivery | 0.1% | both the purchaser and seller on the buying and selling value of the stock |
| Futures | 0.02% | The seller, on the selling value |
| Options (premium) | 0.1% | The seller, on the selling value of the option premium |
| Options (exercised) | 0.125% | The purchaser, on the intrinsic value of the options that are bought and excised |
Impact of STT on Intraday Profit
- Increased Transaction Costs: STT adds a layer to the trading costs, and for high-volume traders, these tiny deductions stack up faster.
- Direct Hit on Gains: STT is charged at 0.025% on every sell order, which reduces profits and deepens losses instantly.
- Strategy Impact: The traders chasing tiny price moves need to factor STT into their break-even point, as it can wipe out small margins.
- Non-Refundable: STT can’t be reversed, but the traders running a business setup can claim it as an expense to lower taxable income.
How to Reduce STT Legally in Intraday Trading
- Claim STT as a Business Expense: When the traders file intraday income as speculative business income, STT becomes a valid business expense under tax laws, which reduces taxable profit.
- Get Professional Guidance: Since tax rules around trading can get tricky, working with a CA or tax expert ensures proper filing and avoids compliance issues.
- Optimise Trading Strategy: The traders can manage STT impact by using F&O, which has lower STT rates, to aim for better profit margins per trade while reducing high-frequency trades.
- Reduce Taxable Profit: When the traders claim STT as a business expense, it lowers their net business income, which means they are taxed on a smaller profit amount.
STT vs Other Intraday Charges
| Intraday Charges | Rate | Applicable on |
| STT | 0.025% | The sell side |
| Brokerage fee | Flat ₹20 or 0.1%-0.5% (varies across platforms) | Both buying and selling side |
| Exchange charges | NSE: 0.00297%BSE: 0.00375% | Both buying and selling side |
| SEBI charges | 0.0001% | Both buying and selling side |
| Stamp duty | 0.003% | The buy side |
| GST | 18% | Both buying and selling side |
STT on Intraday & Income Tax Relation
The relation between STT and income tax develops from how intraday trading income is classified. Intraday profits and losses fall under Profits and Gains of Business or Profession and are treated as speculative business income.
STT paid on these trades counts as a business expense under the Income Tax Act. The traders can deduct the total STT paid from their gross trading profits or losses to arrive at their net taxable business income, while reducing the overall tax burden.
Once the net income is calculated, it’s added to the trader’s other income sources and taxed according to their normal income tax slab.
Conclusion
STT may look like a small charge, but it plays a big role in shaping the intraday profits. Since it applies to every sell order, the traders must account for it while planning entries, exits, and risk-to-reward setups. Understanding its rate, impact, and tax treatment helps traders in calculating true costs and making smarter decisions. Having a clear awareness of STT leads to more accurate profit expectations.
FAQ‘s
STT is a tax charged at 0.025% by the government on intraday stock trades. For equity intraday, it applies only when traders sell the stock. The tax is applicable to the sell-side transaction value. It appears small, but it contributes to the overall trading cost.
No, STT is applied only on the sell side of equity intraday trades. The buy side carries no STT. This makes it slightly lighter than delivery trades, where both buying and selling attract STT.
STT is calculated on the total value of the shares sold. The formula is STT = Quantity sold × Average selling price × 0.025%. The brokers auto–deduct it during execution, and the charge appears in the contract note.
When the traders sell options, STT is charged at 0.1% on the premium, which is higher than the 0.025% rate for intraday equity. This difference exists because the options follow a separate pricing and settlement system, so their tax rate is structured differently.
Yes, STT directly lowers net profit because it adds to the transaction cost of every sell order. These small charges add up to reduce the overall returns, especially for the frequent traders.
