Stamp duty on securities transactions in India

Overview

Stamp duty on securities transactions in India is a state-level tax levied under the Indian Stamp Act 1899. Prior to 1 July 2020, stamp duty rates and collection mechanisms varied significantly across states, with some states levying duty on both sides of a transaction, creating a fragmented and often non-transparent cost for traders. The Finance Act 2019 amended the Indian Stamp Act 1899 and introduced a uniform national framework for stamp duty on exchange-traded securities, effective 1 July 2020.

Under the reformed framework, stamp duty on securities transactions is:

1. Levied at uniform rates set by the central government, regardless of which state the exchange is located in.
2. Collected only on the buy side (not on the sell side).
3. Collected by the exchange’s clearing corporation at the point of settlement and remitted to the state government of the buyer’s registered address.

At Zerodha , stamp duty appears as a separate line item on the contract note and is collected at the prescribed rate on all buy-side transactions in equities, futures, options, and mutual fund units traded on the exchange.

Pre-2020 fragmentation

Before the Finance Act 2019 reform, each state levied its own stamp duty on share transfer deeds and contract notes. Maharashtra, for example, levied duty on both the buyer and the seller. Tamil Nadu, Karnataka, and other states had different rates. Several states levied duty only on one side. The inconsistency meant that the effective stamp duty cost for a given trade depended on both the state of the exchange and the state of registration of the broker, not the investor.

The central amendment standardised rates, eliminated the sell-side levy, and centralised collection through exchanges, with proceeds redistributed to states based on the buyer’s state of residence. This was intended to prevent state-level competition to attract exchanges through low stamp duty and to simplify compliance.

Uniform rates effective 1 July 2020

Stamp duty is nil on the sell side of all instruments.

Rationale for buy-side only levy

The pre-2020 system of levying stamp duty on both sides of a transaction resulted in double taxation of the same economic transaction (a single share transfer was taxed on both the buyer and the seller). The Finance Act 2019 reform aligned Indian practice with international norms: in most jurisdictions, transfer taxes or stamp duties are levied on one party only. The buyer’s state is chosen as the collection point because the buyer is the one acquiring a new property right.

State distribution mechanism

The central collection and state distribution mechanism works as follows:

1. At trade settlement, the exchange’s clearing corporation deducts stamp duty from the buyer’s account (as part of the debit for the purchase).
2. The clearing corporation aggregates stamp duty collected across all buyers in a day.
3. The clearing corporation remits the total to the central government (specifically the Depository/Clearing Corporation acting as the collecting agent under Section 9A of the Stamp Act as amended).
4. The central government or the designated agency distributes the proceeds to each state in proportion to the stamp duty attributable to buyers resident in that state.

For Zerodha clients, stamp duty is attributed to the state matching the client’s registered KYC address. A Zerodha client resident in Rajasthan pays stamp duty that is credited to the Rajasthan state government, even though the trade executes on NSE in Maharashtra.

Calculation examples

Equity delivery purchase: Rs 1,00,000

Stamp duty = 0.015% x Rs 1,00,000 = Rs 15.00

Equity intraday buy: Rs 5,00,000

Stamp duty = 0.003% x Rs 5,00,000 = Rs 15.00

Nifty futures buy: 1 lot at 23,000 (75 units, contract value Rs 17,25,000)

Stamp duty = 0.002% x Rs 17,25,000 = Rs 34.50

Nifty options buy: premium Rs 150 x 75 units = Rs 11,250

Stamp duty = 0.003% x Rs 11,250 = Rs 0.34

On the sell side of all these instruments: Nil

How stamp duty appears on the Zerodha contract note

On Zerodha’s electronic contract notes, stamp duty is listed as a separate line item for buy transactions. On sell transactions, the stamp duty line is either absent or shows zero. Stamp duty is not subject to GST (it is a statutory tax, not a service fee), so it appears outside the GST base on the contract note.

Zerodha’s Kite app shows an estimated charge breakdown when a client enters an order, including the estimated stamp duty based on the buy-side turnover. The actual stamp duty is calculated on the executed price and appears on the confirmed contract note.

Stamp duty on off-market transfers

Securities transferred directly between demat accounts (not through an exchange) are not subject to the uniform electronic stamp duty mechanism. Off-market transfers are governed by the Indian Stamp Act provisions applicable to transfer instruments (share transfer deeds), and the rates depend on the instrument and state law. For Zerodha clients using off-market transfers, see off-market transfer charges .

Interaction with STT

Stamp duty and STT are separate levies that can both apply to the same trade. They are independently computed and charged. Stamp duty is levied by the state under the Indian Stamp Act; STT is levied by the central government under the Finance Act 2004. The fact that STT is paid does not reduce or eliminate stamp duty, and vice versa.

Historical comparison

Before 1 July 2020, stamp duty on a Maharashtra buyer purchasing shares through NSE (located in Maharashtra) was approximately 0.01 percent on both buy and sell sides (for delivery shares). A round trip incurred 0.02 percent in stamp duty. Under the post-2020 framework, stamp duty is 0.015 percent on buy only – a reduction for the buyer, elimination for the seller, and clarity for all.

Exemptions

The following are not subject to stamp duty under the unified electronic framework:

• Sell-side transactions (across all instruments)
• Government securities (separate lower rate exists)
• Trades in sovereign gold bonds on exchanges
• Redemption of mutual fund units (stamp duty applies on exchange purchase but not on fund-house direct redemption for non-exchange-settled funds)
• Foreign institutional investor trades under certain treaty provisions (state-level exemptions may apply under old regime residuals; verify with legal counsel)

Stamp duty and income tax

Stamp duty paid on the purchase of securities is part of the cost of acquisition. Under Section 48 of the Income Tax Act 1961, which governs the computation of capital gains, the cost of improvement and the cost of transfer are deductible against the sale consideration. Stamp duty on the buy side forms part of the purchase cost; it is therefore factored into the cost of acquisition and reduces the capital gain when the asset is sold.

For traders assessed under business income, stamp duty is deductible as a business expense.

See also

• Zerodha brokerage structure overview
• STT and CTT on Zerodha
• GST on broking charges
• SEBI turnover fee
• Exchange transaction charges
• Off-market transfer charges
• Zerodha
• National Stock Exchange
• Bombay Stock Exchange

References

1. Indian Stamp Act 1899, Schedule I, Articles 5 and 6, as substituted by Finance Act 2019
2. Finance Act 2019, Sections 89-96 (amendment to Indian Stamp Act)
3. Ministry of Finance Notification: Uniform Stamp Duty rates effective 1 July 2020
4. SEBI Circular on collection of stamp duty by clearing corporations – SEBI/HO/MRD2/DCAP/CIR/P/2020/127
5. Income Tax Act 1961, Section 48 – computation of capital gains
6. Zerodha Charges page, support.zerodha.com/category/charges (accessed May 2026)