Budget 2019-20 ; Option Buyers Get STT Relief

Option Buyers Get STT Relief, Trading a Lift

In a major relief to options buyers, the union budget 2019-20 has proposed that securities transaction tax (STT) be calculated on the difference between the strike price & settlement price instead of the value of a contract.

Share analysts believe this is beneficial for options buyers, although it might affect ‘In the Money’ option sellers. 

But overall, the move would boost volumes and participation in the options segment.

As of now, STT is charged on the entire value for “In the Money” strikes on the buying side, at 0.125%. 

For example, a Nifty option with a strike price of ₹11,800 expires In the Money at a spot price of ₹11,900. It would have cost around ₹1,116 per lot (11900 x 75 x 0.125%). But with the changes, the same would attract an STT of just ₹9.375 per lot (11900-11800)x75x0.125%).

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