How to claim STT rebate or credit in India
Securities Transaction Tax (STT) is a transaction levy collected at source by stock exchanges on the purchase and sale of securities. Many traders search for an STT rebate or tax credit, recalling that such a rebate existed before 2009. This guide clarifies the current legal position, explains when STT is deductible as a business expense, and shows how to enter it correctly in ITR-3.
Historical context: section 88E rebate (repealed)
Section 88E of the Income Tax Act, inserted by the Finance Act 2004 alongside the introduction of STT, provided a rebate equal to the STT paid, credited directly against the tax liability, subject to certain conditions. This made STT a form of advance payment against income tax for traders and investors.
The Finance Act 2008 abolished section 88E with effect from Assessment Year 2009-10. Since then, there is no direct credit or rebate mechanism for STT against income tax. Any references to an STT rebate in older books, blogs, or trading community discussions relate to this repealed provision.
Current position: STT as a deductible expense
Although there is no credit or rebate, section 36(1)(xv) of the Income Tax Act, inserted by the Finance Act 2008 in the same amendment that abolished the rebate, provides that STT paid in respect of taxable securities transactions entered into in the course of a business is deductible as a business expense.
The critical condition is that the income from those securities transactions must be offered as business income. If you report the same transactions as capital gains, the STT paid on them is not deductible.
Who can deduct STT
| Trader / investor type | Can deduct STT? |
|---|---|
| F&O trader (non-speculative business income) | Yes, STT on F&O trades |
| Intraday equity trader (speculative business income) | Yes, STT on intraday trades |
| Delivery equity trader treating delivery as business income | Yes, STT on those delivery trades |
| Equity investor reporting delivery as capital gains | No, STT is not deductible against capital gains |
| Equity investor filing ITR-2 | No |
STT on F&O trades
STT rates on F&O (as of FY 2024-25, post Finance Act 2024 revisions):
| Segment | Transaction | Rate | Charged on |
|---|---|---|---|
| Equity futures | Sale | 0.02% | Turnover |
| Equity options | Sale (exercise) | 0.125% | Settlement price |
| Equity options | Sale (other than exercise) | 0.1% | Premium |
| Equity options | Purchase (exercise) | 0.125% | Settlement price |
Note: with effect from 1 October 2024, the Finance Act 2024 revised STT on F&O options. The STT on the sale of options (other than exercise) increased from 0.0625% to 0.1% of the option premium. Keep this in mind when computing FY 2024-25 charges.
The Zerodha Tax P&L report shows the total STT paid for each segment (equity delivery, equity intraday, F&O). Use the F&O column for the deductible STT amount.
Step-by-step procedure
Step 1: Confirm income classification
Before claiming STT as an expense, confirm that the trades generating that STT are being declared as business income. If you are filing ITR-3 and reporting F&O income under Schedule BP, STT on F&O trades is deductible. If you are filing ITR-2 and reporting equity trades as capital gains, STT on those trades is not deductible.
Step 2: Download the charges breakdown from Console
Log in to console.zerodha.com. Navigate to Reports → Tax P&L and select the financial year. Scroll to the charges summary at the bottom of the page. It shows total charges broken down by:
- Brokerage
- STT (separately for equity delivery, equity intraday, and F&O)
- Exchange transaction charges
- SEBI fees
- Stamp duty
- GST on brokerage and charges
Note the STT figure for the segments you are declaring as business income. Also download the charges CSV for detailed documentation.
Step 3: Segregate by segment
If your return includes both:
- Equity delivery trades declared as capital gains (ITR-2 or Schedule CG of ITR-3), and
- F&O trades declared as business income (Schedule BP of ITR-3),
then only the STT attributable to F&O (and intraday equity, if reported as business income) is deductible. The STT on delivery trades is not deductible.
The Zerodha Tax P&L page shows the charges breakdown by segment, making this segregation straightforward.
Step 4: Enter deductible STT in the trading account
In the ITR-3 offline utility, navigate to Schedule P&L (the Profit and Loss Account for your trading business):
Revenue: Gross receipts (F&O turnover).
Direct expenses (or selling expenses):
- Brokerage: Rs [amount from Console]
- STT: Rs [F&O STT from Console charges summary]
- CTT (if commodity F&O): Rs [amount]
- Exchange transaction charges: Rs [amount]
- SEBI fees: Rs [amount]
- Stamp duty: Rs [amount]
- GST on brokerage and charges: Rs [amount]
Other expenses (if applicable):
- Internet and data subscription
- Advisory fees, charting tools
- Depreciation on trading equipment
The net of gross receipts minus all allowable expenses is the taxable F&O business income.
Step 5: Maintain documentary support
Keep the following documents in case of scrutiny:
- Zerodha contract notes for each trade (downloadable from Console → Reports → Ledger, or from the email archives Zerodha sends for each trading day).
- The Tax P&L report showing the consolidated STT amount by segment.
- Zerodha’s annual charges statement.
If a tax audit under section 44AB is applicable, the auditor will verify the deductible STT against these documents when completing Form 3CD.
CTT: Commodity Transaction Tax
Similar to STT, CTT is levied on non-agricultural commodity futures traded on MCX. CTT paid in the course of commodity derivatives trading that is declared as business income is deductible under section 36(1)(xvi) (inserted by the Finance Act 2013). The procedure for claiming CTT is identical to that for STT. The Zerodha commodity segment Tax P&L page shows CTT paid separately.
Interaction with section 14A
Section 14A disallows expenses incurred in relation to exempt income. Because LTCG on equity above Rs 1.25 lakh and STCG on equity are not exempt (they are taxable at special rates), section 14A does not apply to STT on equity trades. However, if you have exempt income (e.g., dividends received before 1 April 2020 when they were exempt), be careful not to commingle expenses.
What can go wrong
Claiming STT on capital gains trades: This is not allowed under section 36(1)(xv). The deduction is only available when income is offered as business income. Incorrectly deducting STT on delivery trades shown as capital gains can lead to a notice.
Including delivery STT in the F&O expense pool: The Zerodha Tax P&L charges summary shows STT separately by segment. Use only the F&O STT figure, not the combined total.
Ignoring the section 88E repeal: If you rely on old guidance that references the STT rebate, note that this rebate was abolished from AY 2009-10. No credit mechanism exists.
Related guides
- How to declare F&O as business income
- How to file ITR-3 with Zerodha F&O turnover
- How to download the Tax P&L statement from Zerodha Console
- Securities Transaction Tax
- F&O taxation in India
- Section 44AB, tax audit
References
- Income Tax Act 1961, section 36(1)(xv), deduction of STT in the course of business.
- Income Tax Act 1961, section 36(1)(xvi), deduction of CTT in the course of business.
- Finance Act 2004, introduction of STT and section 88E rebate.
- Finance Act 2008, abolition of section 88E rebate; insertion of section 36(1)(xv).
- Finance Act 2024, revision of STT rates on F&O options effective 1 October 2024.
- Income Tax Act 1961, section 43(5), classification of F&O as non-speculative business income.
- Zerodha Console Tax P&L charges documentation, console.zerodha.com/reports/tax-pnl.