STT (Securities Transaction Tax) on mutual funds

0.001% on equity-fund redemptions. Tiny in absolute terms; useful to know it exists.

3 min read · Last reviewed 8 June 2026

Securities Transaction Tax (STT) is a small statutory levy on equity-related transactions, introduced in the Finance Act 2004. For mutual funds, it applies only to equity-oriented schemes and only on the redemption side.

The rate and the scope

STT rate on equity-fund redemption: 0.001%.
What it applies to: any redemption from an equity-oriented mutual fund — including SWP withdrawals, switch-outs from equity to anywhere, and direct sell.
Where it doesn't apply: debt funds, gold funds, international funds (which are typically non-equity for STT classification), purchase-side transactions.

An equity-oriented mutual fund here means one with at least 65% in equity per SEBI categorisation.

How it's deducted

STT is deducted from the gross redemption proceeds before they're credited to your account. On a ₹1,00,000 redemption:

Gross redemption: ₹1,00,000.
STT: ₹1.
Net credit: ₹99,999.

The amount is small enough that most statements absorb it without breaking it out; some show a separate STT line.

STT vs Stamp Duty

Two often-confused levies:

Levy	STT	Stamp Duty
When charged	On redemption	On purchase
Applies to	Equity funds only	All mutual funds (since July 2020)
Rate	0.001%	0.005%
Effective from	October 2004	July 2020

Tax implications

STT paid is not deductible from capital gains — it's a small statutory cost over and above the tax you'll pay on the gain. The economic impact is tiny (0.001% of redemption) but the same regulatory category as the equity-LTCG-12.5% rate that does apply to the gain.

Why it matters at all

For most investors STT is invisible — too small to notice. It does become relevant in two scenarios:

High-frequency switching: a switch-out of equity → equity within the same AMC takes STT on each leg. Doing this 50 times in a year adds up to ~0.05% of average AUM, eaten on top of every other cost.
Year-end reconciliation: tiny "STT" deductions on monthly statements explain the rounding gap between "redemption amount" and "credit received".

Sources