How Higher STT Is Affecting Option Traders in FY26
When you trade options, you have to pay some charges. Securities Transaction Tax (STT) is one of them.
From October 1, 2024, STT on option selling increased from 0.0625% to 0.1% of the option premium. The new rate started before FY26, so option traders paid the higher STT rate during FY26.
The extra amount may look small for one trade. But if you trade regularly and sell options many times, you pay STT on every sale. This can make your total STT much higher.
Let us understand STT and what this higher rate means for option traders.
What Is STT in Option Trading?
STT means Securities Transaction Tax. It is a tax that you pay on some stock market trades. In option trading, STT is charged when you sell an option.
You may buy an option first and sell it later, or you may sell an option first. In both cases, STT is charged when you sell the option.
For example, suppose you buy a Nifty Call option and later sell it. You have to pay STT when you sell the option. So, STT is not only for option sellers. If you are an option buyer, you also pay STT when you sell the option you bought.
How Much Did STT Increase?
Before October 1, 2024, STT on option selling was 0.0625% of the option premium. The rate then increased to 0.1%.
Here is an easy example. Suppose you sell options worth ₹1,00,000. At the old rate, the STT was ₹62.50. At the new rate, the STT is ₹100.
So, you now pay ₹37.50 more on an option sale of ₹1,00,000. For one sale, ₹37.50 may not look like much. But if you sell options many times during the month, you have to pay STT on every sale. When you add all these amounts, you may find that you are paying much more than before.
Why Does Higher STT Matter?
Higher STT means you now pay more tax when you sell an option. You also pay other charges when you trade, such as brokerage, GST, exchange charges and stamp duty. So, STT is only one of the charges you need to pay.
Suppose you make ₹1,000 on a trade. You also have to pay the charges for that trade, so after paying them, you will have less than ₹1,000.
This can make a bigger difference when your profit is small. For example, if you make ₹5,000, a small charge may not look very big. But if you make only ₹300 or ₹500, the charges can take away a bigger part of your profit.
So, when you check how much you made from a trade, you should also check how much you paid in charges.
Traders Who Take More Trades May Pay More
If you take more trades, you may also pay more in trading charges. Suppose one trader takes 10 trades in a month and another takes 100 trades. The trader taking 100 trades will buy and sell options many more times, so they may also have to pay charges more often.
This is important for traders who take many trades and try to make a small profit from each one. The charge on one trade may look small, but when you pay charges on many trades, they can take away a bigger part of your profit.
For example, suppose you make ₹20,000 from your trades before paying charges. If your total trading charges are ₹8,000, you have ₹12,000 left after paying the charges.
So, taking more trades does not always mean making more money. You should also see how much money is left after paying all the trading charges.
How Does Higher STT Affect Option Buyers?
Option buyers also need to understand STT because they usually sell the option they bought when they want to come out of the trade.
For example, suppose you buy a Nifty Put option at ₹100. Later, its price goes up to ₹120 and you decide to sell it. STT is charged when you sell the option, even though you started the trade by buying it.
If you buy and sell options many times during the day, you may also pay STT many times. This is why option buyers should also check how much they are paying in STT.
How Does Higher STT Affect Option Sellers?
Option sellers pay STT when they sell an option. Because the STT rate is now higher, they have to pay more STT than before. If you sell options regularly, you may pay this higher STT many times, so the total amount you pay can become bigger.
This does not mean that option selling is good or bad. It simply means that you should also check your trading charges when you see how much money you made.
For example, your trades may show a profit of ₹10,000. But after paying STT and other trading charges, you will have less than ₹10,000 left.
STT Is Not the Only Charge
STT is only one charge that you pay while trading options. There can be other charges too.
These may include:
- STT
- Brokerage
- GST
- Exchange charges
- Stamp duty
- Other charges
Suppose you make ₹10,000 from your trades and pay ₹2,000 in total trading charges. After paying these charges, you have ₹8,000 left.
This is why you should check all your trading charges, not only STT. Your broker gives you details of the charges paid on your trades. You can check these details to see how much you paid and how much money you made after paying all your trading charges.
What Can Option Traders Do?
Option traders should know how much they are paying in STT and other trading charges. As part of your option trading analysis, check your trades at the end of the week or month. See how many trades you took, how much money you made or lost and how much you paid in charges.
This can also help you see if you are taking too many trades. Sometimes you may take another trade even when there is no clear reason to take it. Every extra trade can also add more charges.
Taking more trades does not always mean making more money. So, take a trade when you have a clear reason based on your trading strategy. Do not take extra trades just because you want to keep trading.
Final Thoughts
STT on option selling increased from 0.0625% to 0.1% of the option premium from October 1, 2024. The new rate started before FY26 and continued during FY26.
For one trade, the extra STT may look small. But if you trade regularly, you may pay this extra amount many times. When you add all these amounts, the total can become much bigger, especially if you take many trades and try to make a small profit on each trade.
So, when you check how much money you made from trading, also check how much you paid in STT and other charges. The money left after paying all your trading charges is what really matters.
A profitable trade is not only about how much you make. Always check how much you pay in STT and other trading charges, because the money left after all charges is what really matters.
