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What is Security Transcation Tax - STT ?
STT, or Securities Transaction Tax, is a tax charged on shares, futures, options transactions. It is not applicable on commodities or currency trades.

STT is charged on trades on the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and other recognized stock exchanges. For commodities, CTT (Commodities Transaction Tax) is levied.

STT was introduced in India by the 2004 budget and is applicable with effect from 1st October 2004.
This tax is payable whether you buy or sell a share and gets added to the price of the stock at the time the transaction is made. Since brokers have to automatically add this tax to the transaction price, there is no way to avoid it.
What rate is Securities Transaction Tax payable?
Different STT rates are applicable for Equity (cash) and Futures and Options (F&O) transactions as mentioned below

STT applicable for Equity Transactions
Delivery Transactions
Purchase: 0.10% of Turnover i.e. (Number of Shares x Price)
Sell: 0.10% of Turnover i.e. (Number of Shares x Price)

Intra-day Transactions
Purchase: NIL
Sell:  0.025% of Turnover i.e. (Number of Shares x Price)

For example -
Assuming a trader buys 100 shares of Tata Motors at Rs. 350 and sells it at Rs. 355. Since a trader sold it within the same day, a STT charge will be of intraday.
= The STT charge for intraday for selling is 0.025% on selling amount
= Selling amount - 355 (selling price) x 100 (shares) = Rs 35,500
= STT of 0.025% of Rs 35,500 is Rs 8.875
= So the Security transaction charge applicable for this trade is Rs 8.875.
STT applicable for Derivative Transactions
Future Transactions
Purchase: NIL
Sell: 0.010% of Turnover i.e. (Number of Lots x Lot Size x Price)

Option Transactions
Purchase: NIL at the time of purchase of option. However the purchaser has to pay 0.125% of the Settlement Price i.e. (Number of Lots * Lot Size * Strike Price), in case of option exercise
Sell: 0.017% of Premium
Summary of the Securities Transaction Tax rates is given in the table below: