STT or Securities Transaction Tax is a tax you pay when you sell mutual fund units, especially equity-oriented mutual funds. It is charged by the government and is included in your transaction cost. STT affects your total return, so understanding it is important before investing or redeeming mutual funds.

What Is STT in Mutual Funds?

STT stands for Securities Transaction Tax. It is a small tax that investors must pay when they sell equity mutual fund units on the stock exchange. It is not applicable while buying mutual funds or selling debt mutual funds. The tax is deducted automatically by your broker or mutual fund platform.

Why Is STT Important in Mutual Fund Investing?

STT is important because it affects the overall cost of your investment. While it is a small percentage (usually 0.001% on redemption), it still impacts your final return. When calculating profits, you should subtract STT along with other costs to get the correct picture of your gains.

When Do You Pay STT on Mutual Funds?

You pay STT only when you sell or redeem units of equity-oriented mutual funds. It is not applicable when you buy them. Also, STT does not apply to debt mutual funds or hybrid funds with less than 65% equity exposure. Knowing when STT applies helps you plan your redemptions better.

How Much Is the STT on Mutual Fund Sales?

The current STT on selling equity mutual fund units is 0.001% of the transaction value. It is a very small amount but still counts as an extra cost. This charge is automatically deducted and you don’t need to pay it separately.

Does STT Affect Tax on Mutual Fund Gains?

STT does not directly affect your capital gains tax, but it helps you qualify for long-term capital gains tax benefits. To get 10% LTCG tax (instead of 15% short-term), STT must be paid during the sale. So, paying STT confirms that the sale is eligible for lower tax if held more than one year.

Is STT Avoidable in Mutual Fund Transactions?

No, STT is a government tax and is mandatory on equity fund redemptions. It cannot be avoided if you are selling through the stock exchange or directly to the fund house. It is a part of your transaction and is automatically collected.