Quick Answer
Since 1 April 2026, STT on an option you sell is 0.15% of the premium. It was 0.10% until 31 March 2026. You pay it once, on the sell order, and you pay it whether the trade wins or loses. If a short leg later expires in the money, you owe no extra STT, because the exercise charge (also 0.15%, on intrinsic value) falls on the purchaser, not the seller. Both points are in the NSE's circular on the Finance Act 2026 rate change, linked in the sources below.
So the mistake sellers make is not one mistake. Some still use the old 0.10% rate. Some think an in-the-money expiry puts a second, bigger STT bill on their short leg, which it does not. And almost everyone forgets the sells that are not part of the plan: the hedge you sell back, the re-entry after a stop-loss, and the futures leg you use to hedge delta. Those are where the STT actually builds up. For where STT sits among the other costs a new seller faces, see the Nifty option selling guide for beginners.
Paper trade any cost model before you let it decide anything with real capital. Rates below are what the exchange circular says on the day this page was updated. Check the current figure before you build it into a live model.
The current STT rates, side by side
STT is a government tax collected through the exchange. Your broker collects it and passes it on, so it is the same whichever broker you use. The table is taken from the NSE circular (NSE/FATAX/73524, 31 March 2026), which reports the changes made by the Finance Act 2026. That Act received the President's assent on 30 March 2026.
| Transaction | Rate from 1 Apr 2026 | Rate until 31 Mar 2026 | Paid by | Charged on |
|---|---|---|---|---|
| Sale of an option | 0.15% | 0.10% | Seller | Premium |
| Option exercised (ITM at expiry) | 0.15% | 0.125% | Purchaser | Intrinsic value |
| Sale of a future | 0.05% | 0.02% | Seller | Trade value |
| Buying an option (not exercised) | Nil | Nil | - | - |
Two things stand out. First, the sell-side rate went up by half (0.10% to 0.15%), and the exercise rate went up by a fifth. Second, the two rates are now the same number, 0.15%. Before April they were not, which is part of why older articles make so much of the gap between them. The gap that remains is the base: premium for a sale, intrinsic value for an exercise.
You will also see the earlier steps quoted by brokers: 0.0625% on the sell side from April 2023, then 0.10% from October 2024. Those are from broker explainers published at the time, not from the 2026 circular, so check the exchange's circular archive if you need exact dates for a long backtest.
The common mistake: thinking the seller pays on exercise
Many pages, and many sellers, assume that an option seller whose leg finishes in the money gets hit by a second, much larger STT charge on intrinsic value. That is not what the rules say. The NSE circular lists the exercise charge as payable by the purchaser. The person who bought the option and exercises it pays. The person who wrote it does not.
Other sources line up with this. Zerodha's support page puts the exercise charge against "options bought and exercised" and the premium charge against "options shorted". OpenAlgo's tax course states it in its rate table: options exercised, 0.15%, paid by the purchaser, charged on intrinsic value. ICICI Direct's note on the Budget changes says the same: premium sold, seller pays; exercised, buyer pays.
So if you sold a NIFTY call, it ends 120 points in the money, and it is settled in cash, your STT on that call is exactly what it was the moment you sold it. You have lost the 120 points, minus the premium you took. The tax is not what hurts.
A worked example at lot size 65
Take one NIFTY weekly short strangle, one lot of 65. You sell a call at Rs 55 and a put at Rs 55. Premium value is Rs 55 x 65 = Rs 3,575 per leg, Rs 7,150 in all. These are illustrative numbers. Put in your own premiums and the live rate.
| Case | What happens | STT |
|---|---|---|
| A. Both legs expire worthless | You paid on the two sell orders only | 0.15% x Rs 7,150 = Rs 10.73 (Rs 7.15 at the old 0.10%) |
| B. Call ends 120 points ITM, short side | Intrinsic value is 120 x 65 = Rs 7,800. You lose that, less the Rs 3,575 premium. No exercise STT for the seller | Still Rs 5.36 on that leg, nothing added |
| C. You buy the call back before the close | A purchase that closes a short. No STT on the buy | Still Rs 5.36 on that leg, nothing added |
Look at B and C. They have the same STT. Whether you hold the losing leg into settlement or buy it back, the tax is identical. The difference between them is the P&L and the risk, which is where your attention should go.
The hike itself is small here. Case A costs Rs 3.58 more per lot than it would have in March. On 52 weekly strangles that is under Rs 200 a lot a year. If you run it with four lots and re-enter after stop-losses, it is still a modest number next to slippage. I would not change a strategy because of this STT line. I would make sure the model charges it correctly.
One more detail from the contract note. Zerodha's support page says STT is rounded to the nearest rupee, with 50 paise or more rounding up. So a Rs 5.36 charge shows as Rs 5, and a trade at Rs 5.62 shows as Rs 6. Over many small trades the rounding mostly washes out, but do not expect your note to match your spreadsheet to the paisa.
Where a hedged seller actually pays more
The exercise charge does reach sellers in one place: the long legs. If you run an iron condor, or a strangle with bought wings, the wings are options you bought. If one finishes in the money, you are the purchaser, and you pay 0.15% on its intrinsic value.
Example. You bought a call wing for Rs 4. At the close, NIFTY is 150 points above its strike. Intrinsic value is 150 x 65 = Rs 9,750. Exercise STT is 0.15% of that, about Rs 14.63. If instead you had sold the wing back at Rs 148 shortly before the close, STT on that sale would be 0.15% of Rs 148 x 65 = Rs 9,620, about Rs 14.43. Close to the same.
That is the honest finding. Near expiry, a deep in-the-money option trades close to its intrinsic value, so the premium base and the intrinsic base are almost equal. With both rates at 0.15%, there is very little STT to save by selling a wing instead of letting it be exercised. If you hold a wing that ends worthless, you pay nothing on it at all. The old advice to dodge a huge exercise charge made sense when the base was different and the rates were far apart. It is much weaker today. For how we think about wings in the first place, see hedging an option-selling position and short strangle explained.
The sells you did not plan for
STT counts sell orders, not trades you think of as one idea. Count them for one day of a strangle with a stop-loss and one re-entry:
- Sell the call to open. STT on its premium.
- Sell the put to open. STT on its premium.
- Stop-loss hits on the call. You buy it back. No STT.
- You re-enter by selling a fresh call. STT again, on the new premium.
- If you hedge with a bought wing and sell it back at the end of the day, that sale carries STT too.
Systems that re-enter or adjust more often make more sell orders, and the STT scales with that count. A spreadsheet that models "two legs, one STT each" misses steps 4 and 5.
The bigger trap is futures. Suppose you hedge delta on a strangle by selling a NIFTY future. Say the index is at 25,000 for illustration. One lot of 65 has a notional value of 25,000 x 65 = Rs 16,25,000. STT on a futures sale is 0.05% of that, Rs 812.50. The same lot's STT on the strangle's premium was Rs 10.73, so one futures hedge sale costs about 75 times the STT of the whole options position. Before April 2026 the futures rate was 0.02%, so the same hedge cost Rs 325. If your hedging plan uses futures, that line deserves a place in the model. The futures vs options risk shape piece covers the risk side of that choice.
How the cost grows with size
Because STT is a flat percentage of premium sold, it is easy to scale. At 0.15%:
| Premium value sold in a day | STT |
|---|---|
| Rs 10,000 | Rs 15 |
| Rs 50,000 | Rs 75 |
| Rs 1,00,000 | Rs 150 |
| Rs 5,00,000 | Rs 750 |
Another way to say it: every Rs 100 of premium you sell costs you 15 paise in STT. At the old rate it was 10 paise. For a premium seller, that is a small tax on a large number of small trades. The exchange transaction charge is a separate cost. Zerodha's charges page lists it at 0.03553% of premium for NSE options, which is about Rs 1.27 on a Rs 3,575 leg. Brokerage, GST and slippage sit on top. Of these, slippage is usually the biggest, and the one a backtest is most likely to understate. See what a backtest can and can't prove.
Costing STT in a backtest or live P&L
Four rules I would hold any cost model to:
- Charge STT on every sell order. That includes hedge sales and re-entries, not only the opening legs.
- Key the rate to the trade date. A backtest that runs across 1 April 2026 needs 0.10% before it and 0.15% after. Using today's rate on 2024 trades overstates your cost. Using an old rate on new trades understates it.
- Charge exercise STT only on long legs that finish in the money. Do not charge it on short legs. If a model does, it is penalising the exact trades the circular exempts.
- Include the futures sell if you hedge with futures, at 0.05% of notional.
If your tool exposes a cost table, check it against these. The usual faults to look for are a single flat rate for every order and missing hedge sales. Our backtesting software comparison and the notes on how to backtest an option-selling strategy go through what a good cost layer should include, and AlgoTest vs Quantiply for expiry-day backtesting looks at two tools in that light.
Paper trade any strategy that relies on a specific cost assumption before risking live capital. Paper trading an option-selling algo shows how to run that check.
Square off or let it settle? Decide on risk, not STT
None of this means you should let short legs ride into settlement. It means the reason to square off is not tax. Real reasons still apply. A leg near the money can move several points in the last minutes. Liquidity thins. Cash-settled index options settle at the exchange's final settlement price, not the price you see at 3:20 pm, which is a topic of its own in square-off meaning for option sellers and the closing auction and expiry settlement. Zerodha's charges page also says brokerage is charged on expired, exercised and assigned contracts, so a position left to settle can carry a charge at that broker that a clean buy-back would not. Check your own broker's page.
The monthly side of the same question, where positions are carried for longer, is in option selling strategy for monthly income.
Is STT deductible?
For most active F&O traders, profit and loss from exchange-traded options is treated as business income. In that case STT paid is generally treated as a business expense. It is not deductible against capital gains, which is one more reason the income classification matters. The detail belongs with a chartered accountant, and we cover the structure in how options trading is taxed in India. Your broker's annual tax P&L statement already totals STT, so use that rather than adding contract notes by hand.
What to check before you trust a cost number
- Is the sell-side rate 0.15% for trades on or after 1 April 2026, and the old rate for trades before it?
- Does the model charge STT on every sell order, including hedges and re-entries?
- Is exercise STT charged only on long legs that finish in the money?
- If you hedge with futures, is the 0.05% futures sell in there?
- Does your sheet match your contract note after allowing for whole-rupee rounding?
Frequently Asked Questions
How much is STT on option selling now?
Who pays STT when an option is exercised or expires in the money?
Do I pay STT when I buy back a short option to square it off?
Does STT apply to OTM options that expire worthless?
Should I square off an in-the-money short option to save STT?
Is the STT rate the same for NIFTY, SENSEX and stock options?
How should a backtest model STT?
Is STT deductible for an option seller?
Where do I check the current STT rate?
The Bottom Line
STT on options is a small, fixed cost on a sell order: 0.15% of premium since 1 April 2026. An in-the-money expiry does not add an STT bill to a short leg, because the exercise charge belongs to the purchaser. The places a seller really pays more are the ones outside the headline trade: hedge wings that finish in the money, re-entries, and futures hedges. Cost those correctly, key the rate to the trade date, and spend your worry on slippage and risk, which move your results far more than this tax line does.
If your cost model came from a spreadsheet you built before April 2026, open it and check the rate first. Related reading: NIFTY lot size and position sizing and SPAN and exposure margin on a NIFTY strangle.
This article is for educational and informational purposes only and does not constitute investment advice, tax advice or a trading recommendation. EliteAlgo is proprietary trading research and analytical software; it is not a SEBI-registered investment adviser and does not provide trading tips or assured-return claims. STT rates and rules are set by the government through the Finance Act and are revised from time to time. Verify current figures with the NSE's circulars and your broker's charges page before using any number in a live decision. The rupee examples are illustrative. Options trading carries substantial risk of loss. Paper trade any strategy or cost model first.
Sources (checked 9 November 2026): NSE circular NSE/FATAX/73524, "Changes in relation to rates of Securities Transaction Tax", 31 March 2026 · Zerodha Support: How is STT calculated · Zerodha charges page · OpenAlgo: STT and the charges hiding in every trade · ICICI Direct: STT changes in Budget 2026.
