STT On F&O Contracts: Finance Ministry Removes Confusion, Issues Clarification on STT Hike

Even as the government passed the Finance Bill 2023 in the Lok Sabha on Friday, there was a confusion over the quantum of hike in STT in the market. To remove the confusion, the finance ministry later on Friday issued a clarification and said the STT now stands at Rs 6,200 on a turnover of Rs 1 crore, indicating a 25 per cent hike as compared with Rs 5,000 earlier.

In the Finance Bill 2023, which was passed by Lok Sabha on the March 24 morning, STT on the sale of options was hiked to Rs 2,100 on a turnover of Rs 1 crore against an earlier levy of Rs 1,700, thus creating confusion as STT was already hiked from Rs 1,700 to Rs 5,000 in 2016.

STT on the sale of futures contract has been increased to Rs 1,250 on a turnover of Rs 1 crore, a 25 per cent hike as compared with Rs 1,000 earlier.

Explaining the STT hike, Zerodha co-founder Nikhil Kamath in a tweet said, “STT hiked by 25 percent. If an intraday retail trader buys and sells 10 lots of nifty futures, he has to pay Rs 855 in STT or 1.7 points on each Nifty lot; if he trades 10 times a day, he has to capture 17 points of a nifty move every day on STT alone.”

He added that this is outside of Exchange charges, Stamp duty, Gst, Brokerage, and Sebi charges. The impact of each is as per the sequence above. Adding all this, he has to capture 30 points between Nifty volatility daily to break even (10 trds/day).

“By chance, if someone is profitable after all this, they pay the maximum income tax rate. We then wonder why many traders find it hard to be profitable. A robust and liquid stock market is cardinal to our economy; the small guy helping make this happen should also be helped,” Kamath also said.

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