Definition : Securities Transaction Tax (STT) refers to the tax levied on transaction (purchase or sale) of securities listed on the Indian stock exchanges. Such securities include equity shares, derivatives and equity-oriented mutual fund units. The rate is specified by the Central Government from time to time. STT is not applicable for any off-market transactions.
Explanation: STT was originally introduced in 2004 by the then Finance Minister, Sri P. Chidambaram to curb avoidance of capital gains tax. This tax is payable whether you buy or sell a security and gets added to the price at the time the transaction. STT is added/deducted at source by the broker or AMC.