Know the details about the How To Reduce STT Charges In Intraday Trading Step by Step Guide, How To Reduce Stt Charges In Intraday Trading
How To Reduce STT Charges In Intraday Trading: A Comprehensive Guide
Securities Transaction Tax (STT) is an unavoidable expense for traders in the Indian stock market. However, it’s possible to minimize these charges, especially when dealing with intraday trading. This guide provides a step-by-step overview of how you can reduce STT charges in intraday trading.
How To Reduce STT Charges In Intraday Trading Step by Step Guide
What is STT?
Securities Transaction Tax is a direct tax that is levied on every purchase or sale of securities listed on the Indian stock exchanges. Introduced by the Indian government in 2004, the main aim of STT is to prevent tax evasion by taxing transactions at the source.
STT and Intraday Trading
Intraday trading consists of buying and selling stocks within the same trading day. The STT charged for intraday trading is only on the sell side and is set at 0.025%.
How to Reduce STT Charges in Intraday Trading
While it’s not possible to completely avoid STT, there are ways to minimize this cost:
1. Opt for High-Volume Trading
Trading in high volumes can help to offset the impact of STT. As the profit margins increase, the percentage impact of STT on your profits decreases.
2. Trade in STT Exempted Securities
Certain securities are exempted from STT. Trading in these securities can help avoid STT charges. These include Government securities, bonds, and debentures.
3. Close Positions Before Market Close
Ensure that all open positions are closed before the market closes. If not, the trade will be considered as a delivery trade, and the STT will be higher.
Points to Note
- Remember, STT cannot be entirely avoided while trading in equities.
- STT is automatically deducted at the time of the transaction.
Frequently Asked Questions
1. Can I get a refund on STT paid?
No, STT once paid cannot be refunded.
2. Is STT applicable on off-market transactions?
No, STT is not levied on off-market transactions.
3. Is STT applicable on Mutual Funds?
Yes, STT is applicable on equity-oriented mutual funds at the rate of 0.001% at the time of redemption or sale.
In conclusion, while STT is an unavoidable cost in intraday trading, it can be minimized through strategic trading decisions. By understanding how STT works and how it’s charged, traders can make more informed decisions and improve their net profits.