Securities Transaction Tax : Union Budget 2026
The Finance Minister recently proposed to raise the Securities Transaction Tax (STT) on both futures and options by up to 150%.
- It is a direct tax levied on the purchase and sale of securities listed on recognised stock exchanges in India.
- It is levied and collected by the Central Government.
- It is applied irrespective of the profit or loss made in the transaction. It is levied directly on the value of the transaction.
- STT operates similarly to Tax Deducted at Source (TDS) in that it is deducted at the time of the transaction itself.
- The tax is paid directly to the government through the stock exchanges or other intermediaries involved in the transaction.
- Introduced through the Finance Act of 2004, STT was designed to simplify taxation on securities trading and curb tax evasion in the capital market.
- STT is governed by the Securities Transaction Tax Act (STT Act), and STT Act has specifically listed various taxable securities transactions, i.e., transactions on which STT is leviable.
- Taxable securities include equities, derivatives, or equity-oriented mutual funds investment units (excluding commodities and currency).
- It also includes unlisted shares sold under an offer for sale to the public included in IPO and where such shares are subsequently listed in stock exchanges.
- STT is not applicable to off-market transactions or to commodity or currency transactions.
- The rate of taxation is different for different types of securities.
- The government has the authority to revise STT rates periodically.
