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The Securities Transaction Tax (STT) on the Futures and Options (F&O) segment is set to rise starting October 1, 2024. This change follows the income tax proposals outlined in the Union Budget for FY 2024-25, presented by Finance Minister Nirmala Sitharaman earlier this year.
As part of the revised tax structure, STT on the sale of futures contracts will increase to 0.02%, while STT on options contracts will rise to 0.1%. These adjustments are expected to impact traders and investors dealing in the F&O market.
Impact on Share Buybacks
In addition to the STT changes, another notable update is the taxation of income derived from company share buybacks. Starting this fiscal year, income from buybacks will now be taxed in the hands of the investors, aligning it with the tax treatment of dividends. Previously, this income was taxed at the company level. Investors will also be able to treat the cost of such shares as a capital loss.
What is STT?
The Securities Transaction Tax (STT) is a direct tax imposed on transactions involving securities listed on stock exchanges. It applies to the sale and purchase of equity shares, futures, and options contracts. STT rates vary based on the type of trade, such as intraday trades, equity delivery, or F&O contracts.
New STT Rates: What’s Changing?
Effective from October 1, the STT on futures sales will rise from 0.0125% to 0.02% of the traded price. Meanwhile, the STT on options sales will increase from 0.0625% to 0.1% of the option premium.