I have some serious query regarding Stamp Duty calculations, esp. in exercised options.
I raised ticket and got prompt reply. But this seems to be in disagreement with the reply from other broker.
Hope you will spare some valuable time in resolving my query.
#20201030972869
As per the reply from zerodha - there is no stamp duty levied on the ITM options which are left to be exercised.
But as per the reply from my other broker - there is indeed 0.003% Stamp Duty on exercised contracts. Plz help.
@maddy_Des Stamp duty is applicable to physically settled stock derivatives (both futures and options) if you are on the buy side of the securities. The exchange calculates the stamp duty on the final settlement value. So if you are exercising an option and getting the delivery of shares, stamp duty will be charged on the value of securities that will be delivered to you.
There isn’t any stamp duty in case of settlement of cash-settled contracts (Index F&O).
Here’s the excerpt from the exchange circular on stamp duty.
@Nakul
Please be regular in checking my messages here for some time. This is serious. Some other brokers are charging SD on the exercised Index options as well.
And I dont know who is correct. But I looked at the circular and my attention is drawn to below mentioned excerpt.
The Stamp Duty charged to you is correct. On our website it states that the Stamp Duty will be charged on buy trades only but since your trade was exercised, Stamp duty will be charged to you at 0.003% as per link: LINK…/index.php
You can refer to NSE circular for more details. To access this circular, go to NSE website in the below link, then go to Archived Circulars and enter 43116 circular number in the Download Circular No box to refer to NSE circular related to this : LINK…/circular.htm
In the zip file, you can refer to CMPT43116(Revised).pdf
In that report you will see ‘Security other than debenture on non-delivery basis’ as 0.003 % for Receiver. Non-Delivery means cash settled options.
If you need further assistance, please let me know
Not sure about other brokers. But whatever is collected as stamp duty must reach the respective state governments.
As per the law, the exchanges, clearing corporation, and the depositories are the collecting agents of stamp duty for transactions in the stock exchanges and depositories, on behalf of the state governments. These collecting agents collect the stamp duty from their members and then pay it to the respective state governments.
As a trading member/depository participant, we get a file from the exchange/depository (collecting agent) with the client-wise stamp duty that needs to be collected. We charge the same from the clients and pay it to the collecting agent (exchange/depository).
Now coming to the question of whether stamp duty is charged for exercised index options or not? We’ve not come across a case where we’ve been charged for it as it is not physically settled.
In a physical delivery contract, if the delivery of securities doesn’t actually happen, you’ll be charged 0.003% stamp duty on the buy side. Say you are having synthetic positions in equity stock derivatives, the delivery of the stock doesn’t really happen as your position will be netted off which is as good as an intraday trade in equities (cash market). This is specific to F&O contracts that are physically settled.
If you’re being charged by some broker I suggest you to first approach them and seek clarification. You always have the option of raising a complaint with the exchange as well.
Not sure if this is the right interpretation. Like I said earlier, at Zerodha we don’t compute the stamp duty ourselves and charge the client. We get a file from the exchange with client wise stamp duty to be collected. We merely collect the stamp duty from the respective clients and pay it to the exchange. We’ve not seen stamp duty being collected for exercised cash settled derivatives.
So disagreement is regarding interpretation of the term “Security on non-delivery basis”
Zerodha - you interpret it as stocks which are not being actually delivered for whatever reasons. And not cash-settled derivatives like Index derivatives.
Others - believe this means and included cash settled derivatives including Index derivatives.
And I think main evidence to which I can point other broker to, is this:
So they can check and tell me exactly how much Stamp Duty was to be collected from me on that day as reported by exchange itself. And see if there is any mismatch!!!
Stamp duty is collected from the client at the buy-side/receiver of the security for trades on the stock exchange. So if you’ve already paid the stamp duty when you originally purchased the cash-settled option, on expiry if you exercise the option, it still won’t be a buy trade for you.
The circular also states the below point which makes it clear that stamp duty at the rates applicable to securities other than debentures (basically what’s traded in the cash market) will also be applicable to physically settled stock derivaties. The table with the rates mentioned under the delivery settlement section is to substantiate on this point.
You can always ask them to reconcile with what the exchange has actually collected from them.
