You can lose money on a share trade and still pay tax on it. A loss of ₹10,000, which is unpleasant but comprehensible.
Then they read the contract note and find they were charged ₹190 in securities transaction tax on a trade that lost money. Not tax on a gain. Tax on the transaction itself, on both the buying and the selling of delivery trades, regardless of outcome.
This is the category of charge that surprises people most, because it does not behave like anything else they pay. It is not a fee for a service, it is not a share of profit, and no broker can waive it. Understanding where it came from explains a great deal about why investing in India costs what it does.
The four charges nobody chose
On any trade, these apply identically at every broker in the country.
Securities transaction tax, levied by the central government on the value of the trade.
Stamp duty, levied when you buy, and paid to your state government.
Exchange transaction charges, taken by the exchange for matching the order.
The SEBI turnover fee, funding the regulator, plus a small investor protection levy on one exchange.
Then GST at eighteen per cent on brokerage, exchange transaction charges and the SEBI turnover fee. GST is not charged on securities transaction tax or stamp duty.
None of these vary between platforms. Comparing brokers on them is pointless, which is precisely why they are worth understanding: they are the part of your cost base that no amount of shopping around will change.
The bargain that was made, and then unmade
Securities transaction tax has a history that explains its oddity, and almost nobody who pays it knows the story.
It arrived on 1 October 2004, and it was not simply an additional tax. It was a swap. In exchange for introducing STT, the government abolished long-term capital gains tax on listed equities entirely and cut the short-term rate. Hold a share for more than a year, sell it, and the profit was tax-free, provided STT had been paid.
The logic was administratively elegant. Rather than chasing millions of investors for capital gains, collect a small levy at the point of transaction, automatically, through the exchange. Nobody could evade it because it was deducted before the money reached them.
For fourteen years that was the arrangement, and it coincided with an enormous expansion of Indian equity markets.
Then in 2018, long-term capital gains tax came back at ten per cent on gains above ₹1 lakh. And securities transaction tax was not withdrawn.
That is the position we are still in, made heavier by the 2024 revision that took long-term gains to 12.5 per cent and short-term to 20 per cent. The tax introduced instead of capital gains tax now sits alongside capital gains tax.
It is worth being accurate about what is unusual here, because the complaint is often overstated. Levying both a transaction tax and a capital gains tax is not rare. The United Kingdom charges half a per cent stamp duty on share purchases and taxes capital gains as well. France, Italy, Ireland, Switzerland, South Korea and others run transaction taxes alongside gains taxes. India is not an outlier for having both.
What is genuinely distinctive is the sequence. In most of those countries the two taxes grew up independently and were never presented as alternatives. In India one was explicitly created as a substitute for the other, and then the one it replaced came back while the substitute stayed.
Whether that amounts to double taxation or simply two taxes on different things is a matter of opinion, and both arguments are respectable. What is not a matter of opinion is that the bargain investors were offered in 2004 no longer exists, while the charge created to fund it does.
Why it hurts more than the rate suggests
The rate on delivery is one tenth of one per cent on each side. That sounds trivial and it is, per trade.
The problem is what it is charged on. Securities transaction tax applies to turnover, not to profit. Buy and sell ₹1,00,000 of shares and you pay on ₹1,00,000 both times, whether you made money, lost money or broke even.
So the cost is a function of how often you trade rather than how well. Someone who buys once and holds for a decade pays it twice. Someone who trades the same capital forty times a year pays it eighty times, on money that may simply be going round in circles.
That is not an accident of design. It is the design.
The tax as a deliberate instrument
Which brings us to what happened in April 2026.
Securities transaction tax on derivatives went up sharply: futures from 0.02 to 0.05 per cent, options premium from 0.10 to 0.15 per cent. Equity delivery and intraday were left exactly as they were.
That asymmetry is the whole message. The government was not raising revenue across the board, it was making one specific activity more expensive, at a moment when the regulator was separately restricting the same activity through contract sizes, expiry schedules and margin rules.
Read alongside a tax structure that charges you for transacting rather than for profiting, the direction is consistent and long-standing. Because the tax is applied to transactions, trading more frequently can result in higher cumulative transaction taxes.
You do not have to agree with the policy. But knowing it is a policy, rather than an accident, tells you something about which side of it you would rather be on.
Stamp duty, and where it actually goes
Stamp duty is the older of the two and works completely differently.
For a normal exchange-traded purchase of shares, it is charged to the buyer, not the seller. On delivery-based transactions, the rate is 0.015% of the transaction value. Different rates apply to other types of securities and transactions.
Until July 2020 this was genuinely chaotic. Stamp duty is constitutionally a state subject, rates varied across states, and where you lived changed what you paid. That ended with a unified national framework: one rate everywhere, collected centrally through the exchanges, clearing corporations and depositories, and remitted to the state where the buyer is domiciled.
So the money still goes to your state government, but the rate no longer depends on which state that is. It is one of the cleaner pieces of tax reform in Indian markets, and it removed an inefficiency almost nobody noticed while it existed.
The exchange and regulator charges
Smaller, but worth knowing why they changed.
Exchange transaction charges were historically billed to brokers on a sliding scale, with high-volume brokers paying less per trade. What brokers charged clients did not always match what they themselves paid, and allowing brokers to retain the difference.
SEBI ended that from October 2024, requiring these charges to be uniform and true to label. What appears on your contract note as an exchange charge now has to be the exchange charge.
The SEBI turnover fee is ten rupees per crore of turnover, which is one ten-thousandth of a per cent. On a ₹1 lakh trade it is ten paise, and it funds the regulator described in our post on how the market is structured.
What you can actually do about it
Very little directly, and rather more indirectly.
You cannot negotiate any of it. No broker can waive a statutory charge, and any offer to do so should be treated as a warning rather than a discount.
You can trade less often. Every charge here applies per transaction. For most investors, trading less often is the simplest way to reduce the cumulative impact of these charges.
You can size trades sensibly. Percentage charges scale, but the flat components do not. Very small trades carry a proportionately heavier burden.
You can avoid the higher-taxed activities, or at least price them honestly. Derivatives now carry a materially higher statutory cost than they did two years ago, and any strategy modelled on older rates needs redoing.
Common questions
What is securities transaction tax?
A central government tax on the value of securities traded on an Indian exchange. It applies to the transaction rather than to any profit, so it is charged on losing trades too.
Why do I pay STT and capital gains tax?
Because STT was introduced in 2004 in place of long-term capital gains tax, which was then reintroduced in 2018 without STT being withdrawn. Both now apply. Several other countries also levy both, including the United Kingdom, so India is not unusual in that respect. What is unusual is that one was created specifically to replace the other.
Is stamp duty charged on selling shares?
No. On exchange-traded securities stamp duty is charged to the buyer only.
Why is stamp duty the same everywhere now?
Because a unified national framework took effect in July 2020, replacing state-by-state rates with one rate collected centrally and remitted to the buyer’s state.
Can my broker reduce these charges?
No. They are set by the government, the exchanges and the regulator, and are identical at every broker in India. Only brokerage and depository charges vary.
Why did STT on F&O increase but not on delivery?
Because the increase was aimed at derivatives specifically, alongside regulatory measures restricting the same segment. Equity delivery and intraday rates were unchanged.
Do I pay STT if I make a loss?
Yes. It is charged on the value of the transaction, not on the outcome.
What is the SEBI turnover fee?
A charge of ten rupees per crore of turnover that funds the regulator, amounting to ten paise on a ₹1 lakh trade.
The short version
These charges are not broker pricing; they are largely determined by tax and regulatory rules. They were designed to collect revenue at the point of transaction rather than at the point of profit, and the structure deliberately costs more the more often you trade.
That makes them impossible to shop for and entirely possible to plan around. The only meaningful response available to an ordinary investor is to transact less, which happens to be what the structure was built to encourage.
Risk disclosure
Hem Finlease Private Limited, SEBI Registration No. INZ000167734. Hem Securities Limited, SEBI Reg. No. IN-DP-568-2021, CDSL: 17700/17701.
Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI and membership of recognised stock exchanges do not guarantee the performance of the intermediary or provide any assurance of returns to investors.
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