How-to STT MF redemption

How STT is handled on mutual fund redemption

From WebNotes, a public knowledge base. Last updated 19 May 2026. Reading time ~4 min.

Key facts

Equity MF redemption STT	0.001% on redemption value (paid by investor)
Debt MF STT	Nil (no STT on debt MF redemption)
Equity MF purchase STT	Nil (STT not levied on subscription)
Impact on NAV	STT is paid separately; doesn't reduce NAV directly

Securities Transaction Tax (STT) on mutual fund redemption is a minor cost on equity-mode MFs (0.001% of redemption value). The amount is negligible in absolute terms but is conceptually important: it qualifies your redemption for the lower equity LTCG/STCG rates under Sections 112A and 111A.

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Step-by-step procedure

See the procedure infobox above.

STT rates on MFs (CBDT, current)

Transaction	Rate
Equity MF purchase	Nil
Equity MF redemption	0.001% on redemption value
Equity MF switch (in/out)	0.001% on each leg (mostly)
Debt MF purchase / redemption	Nil
Equity ETF purchase (exchange)	0.1% (regular equity STT rate)
Equity ETF redemption (exchange)	0.001% (delivery rate)

The 0.001% rate on MF redemption is much lower than the 0.1% rate on stock purchases. STT on MF redemption is a token amount.

Why STT matters despite being tiny

Per Sections 112A and 111A:

Section 112A (LTCG at 12.5%): Applies only if STT was paid at acquisition and transfer (for stocks), or only at transfer (for MFs).
Section 111A (STCG at 20%): Applies only if STT was paid.

Without STT payment, the higher slab-rate tax applies:

STCG without STT: slab rate (potentially 30%+).
LTCG without STT: 20% with indexation (for stocks; debt-mode for non-STT-paid MFs).

For MF redemption through normal channels (AMC, RTA, exchange-traded MF), STT is automatically paid; you don’t need to do anything.

Comparison with stock STT

Transaction	Stock STT	MF STT
Delivery buy	0.1%	Nil (subscription)
Delivery sell	0.1%	0.001% (redemption)
Intraday	0.025%	n/a
F&O (sell)	Various	n/a

MF STT is structurally lower because the AMC level transactions are already taxed (corporate-level STT in some cases); the investor-level STT is symbolic.

Verifying STT payment

In your capital-gains statement / SoA / Form 26AS:

Equity MF redemption transaction shows STT amount.
For Rs 10 lakh redemption: Rs 10 STT.
Doesn’t appear separately on bank credit (debited from gross proceeds before NAV credit).

Implications for ITR

STT is not income or deduction.
It’s a transaction cost.
Reported in ITR Schedule CG details but doesn’t change net gain calculation.

External references

References

Securities Transaction Tax (STT) - Chapter VII of the Finance (No. 2) Act, 2004.
Income Tax Act, 1961, Sections 111A, 112A.
AMFI Best Practice Guidelines on STT on MF transactions.
CBDT circulars on STT.

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WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 19 May 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.