Securities transaction tax is a tax on a transaction in securities. On a listed share it is collected when the trade happens, usually through the exchange, and it shows on the contract note. It is not income tax, and it is not tax deducted from your salary. People shorten it to STT.
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Tax on shares, equity funds, debt funds, property and gold for one sale.
Open calculatorThe Income Tax Department’s page on the sale of shares is blunt about the gain. Brokerage, commission and other costs of the transfer can be deducted. No deduction is allowed for any sum paid on account of securities transaction tax. When you type a sale into the capital gains calculator, brokerage goes in the expense box. STT stays out. This note does not state an STT percentage. The contract note is the place that figure lives, and the rate is not needed to compute the gain.
STT is also the switch that turns on the special equity rates. Section 196, which was Section 111A, taxes a short-term gain on listed equity at 20% when the sale is chargeable to securities transaction tax. Section 198, which was Section 112A, taxes a long-term gain at 12.5% on the amount above ₹1,25,000 in the year. For an equity share, that long-term section also needs securities transaction tax on the acquisition, subject to exceptions the Central Government can notify. A sale of an equity-fund unit needs it on the transfer. Those rates have applied to sales from 23 July 2024.
An IPO listing-day sale is almost always short-term, because you have held the shares for a few days. The short-term section looks at the sale, not at a second test on allotment. The listing-gains guide walks through that sale. The capital gains guide puts equity next to property, gold and debt funds.
A resident’s contract note can show STT and still show no income-tax deduction. The department’s page tells you to compute the tax on the gain and pay it. Advance tax covers that bill when the year’s tax payable is ₹10,000 or more. STT already paid does not stand in for that instalment.
Keep the contract note. It is the line that separates the sale price, the brokerage and the securities transaction tax. The return uses the price and the brokerage. The securities transaction tax stays on the note and off the gain. Two lots mean two notes. Do not average them into one cost before you have read both.
Checked on 3 November 2026. The rupee thresholds and the rates come from the Income-tax Act, 2025, as this site’s tax pages use them.
Questions
Can I deduct STT from my capital gain?
No. The Income Tax Department’s page on the sale of shares says no deduction is allowed for any sum paid as securities transaction tax. Brokerage on the transfer is a different item, and that one does reduce the gain.
Does a listing-day sale need STT?
The short-term rate in Section 196 (this was Section 111A) applies when the sale is chargeable to securities transaction tax. The long-term rate in Section 198 also needs that tax on the transfer, and, for an equity share, on the acquisition, subject to exceptions the government notifies.
Is STT the same as the tax on the gain?
No. Securities transaction tax is charged on the trade. The tax on the profit is income tax: 20% if the listed equity is short-term, or 12.5% on long-term gains above ₹1,25,000 in the year. Cess is charged on that income tax. The contract note can show both lines.
Sources
Figures checked 3 Nov 2026.