Investing in equity involves paying of Securities Transaction Tax (STT) while buying as well as selling shares. This is an indirect form of tax levied by the Government. Indicated below are the STT rates applicable:
| STT rate applicable while buying shares for delivery | 0.125% |
| STT rate applicable while selling shares for delivery | 0.125% |
| STT rate applicable while trading in shares | 0.025% |
Let’s understand the applicability of STT with an example. For instance, if you buy 100 shares of Company ABC to take delivery at Rs 100 per share, your cost is Rs 10,000 (100 shares x Rs 100 per share). You will have to pay STT of Rs 12.50 (Rs 10,000 x 0.125 per cent) at the time of purchase. If you sell these shares at Rs 200 per share, your total sale will be Rs 20,000 (100 shares x Rs 200 per share. You will again have to pay STT of Rs 25 (Rs 20,000 x 0.125 per cent).
If you undertake trading on 100 shares of Company ABC, you will have to pay STT at the rate of 0.025 per cent on your buy or sell value, whichever is higher. For instance, if your buy value is Rs 10,000 and your sell value is Rs 15,000, STT of Rs 3.75 will be payable on the sell value (Rs 15,000 x 0.025 per cent).