NISM Certifications · NISM-Series-VIII: Equity Derivatives · Accounting and Taxation
For the purpose of Securities Transaction Tax on options, on which value is STT levied when an option contract is sold in the market?
STT on the sale of an option contract is levied on the option premium, that is, the premium multiplied by quantity traded. It is not charged on strike value, notional contract value or on the margin deposited.
- AOption premiumCorrect
- BStrike price multiplied by quantity
- CNotional contract value at the settlement price
- DMargin deposited
Explanation
When an option is sold, STT is charged on the option premium. On exercise, STT applies to the settlement price on the intrinsic value basis. Strike value, notional value and margin are not the base for the sale of options.
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