Every Indian derivatives trade carries a stack of statutory and exchange charges, and the stack has one feature that matters more than all the rest: the securities transaction tax is charged on the premium when you sell an option, and on the settlement value when the option settles into shares. Those are two different bases, and on an in-the-money contract they differ by more than an order of magnitude.
On the opening position, selling the option on expiry day at its intrinsic value of ₹78.20 produces ₹93,840 of premium and ₹140.76 of securities transaction tax at the 0.15% rate in force from 1 April 2026. Carrying the same contract into physical settlement produces ₹140.76 on the exercised option, computed at 0.15% of the intrinsic value, plus ₹1,680.00 on the delivery leg, computed at the delivery rate of 0.10% on the ₹16,80,000 settlement value. Since April 2026 the two option rates are equal, so the whole asymmetry sits in the base: the delivery leg is charged on the full settlement value. Add the stamp duty on the delivery buy, the exchange and regulator charges on both legs, and the cost of selling the shares the next morning, and the settlement route costs ₹4,014.73 against ₹219.28 for the sale, a ratio of 18.3 to 1 (23.2 to 1 at the rates before April 2026). Worked Example 1 builds the whole stack line by line.
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What are the STT rates and the other charges?
Verify flag on the entire rate card. Four rates apply from 1 April 2026, when the Finance Act, 2026 raised the three derivatives rates (as of October 2026). On the sale of an option, 0.15% of premium (0.10% before), payable by the seller. On the sale of a futures contract, 0.05% (0.02% before). On an exercised option, 0.15% of intrinsic value (0.125% before), payable by the purchaser. And where a derivative settles physically, the cash-market delivery rate of 0.10% each side, unchanged. Every one is set by the Finance Act and has been revised repeatedly, most recently in April 2026. Read the current schedule at incometaxindia.gov.in and the exchange's own charge circular, and note the date. Which lines apply to a specific physically settled contract is a question for the exchange's circular rather than for reasoning by analogy.
The rest of the stack is small individually and not small in aggregate. Exchange transaction charges run in the region of 0.0495% of premium on options and 0.00297% of turnover in the cash segment. The regulator's turnover fee is ₹10 per crore. Stamp duty is 0.003% on the buy side of an options trade and 0.015% on a delivery buy. Goods and services tax at 18% applies to brokerage and to the exchange and regulator charges, and not to the transaction tax itself.
What do the charges add up to on a trade?
Put a number on it, because the number is the argument. Buy one Nifty option lot at 150.00 points and sell it at 165.00. Gross gain, ₹1,125. All-in charges on the round trip on a 75-unit lot, ₹79.93 at the April 2026 transaction-tax rate, or 7.10% of the gain (₹73.74 and 6.55% before it). The break-even move is 1.07 index points of premium, so a strategy that expects to capture one point of edge now loses money. Run forty such round trips a year on a ₹2,00,000 account and the charges alone consume 1.60% of the account, before a single losing trade.
A strategy whose expected edge is smaller than its cost stack is an expensive way to donate.
{
"skill": "Building the all-in cost and settlement-cost stack for a specific exchange-traded position, in the market where it will actually trade",
"use": "Have an assistant lay out the charge-by-charge table for a stated round trip (or for the sale-versus-settlement comparison on an in-the-money option), with one row per statutory or exchange line, the base each line is charged on, and the party who pays it, so you have a structured skeleton to fill with rates you have read yourself.",
"tools": ["Chat assistants with code execution - Claude, ChatGPT, Gemini - so the arithmetic is run rather than predicted", "A spreadsheet built as an inputs-driven calculator with every rate in one coloured block", "The exchange's own brokerage/charges calculator, used as a second implementation to diff against, never as the source"],
"prompt": "Build a cost table for this position: <MARKET, INSTRUMENT, LOT/MULTIPLIER, QUANTITY, ENTRY PRICE, EXIT PRICE OR SETTLEMENT>. One row per charge. For each row give: the charge name, the BASE it is levied on (premium, turnover, settlement value, notional), the side that pays it, and the formula. Leave every RATE as a named input variable rather than filling in a number. Then produce the same table for the alternative route (selling before expiry against carrying to settlement) and a final row for the difference. Do not round intermediate values.",
"verify": "Fill in every rate yourself from a primary source and write the date beside each one: the current securities transaction tax schedule at incometaxindia.gov.in, the exchange's own transaction-charge and physical-settlement circulars, the state stamp-duty rate, and your broker's published tariff. Rates in this area are revised by Finance Act and by circular, and a model's recollection of them is stale by construction, which is Guardrail 4 (Date-check) at its sharpest. Then recompute two rows by hand, confirm the base of each charge (premium against settlement value is the single highest-value check in the whole table), and reconcile the total against a real contract note for a comparable trade. A cost table that does not tie to a contract note is a hypothesis.",
"diy": "You must be able to state, without help, which charges are levied on premium, which on settlement value, which on notional, and which side pays each one, and to compute the break-even move a given stack implies. That is the gated skill and Worked Example 1 is the drill. The model can build the skeleton; it cannot tell you that the securities transaction tax base changes when an option settles into shares, because that fact is a statute it half-remembers.",
"market": "IN"
}