What happens if I don't square off my positions in options?

[ShubhS9]

@Maverick_Trader

so if Nifty on expiry is 16000, then the 16500 PE will having an intrinsic value of Rs 500.
In that case will the tax of 0.125 % be charged on 500 X 50 = 25000
i.e. a tax of Rs 31.25 ?

Right, the STT will be on the intrinsic value (500 * 50). Also, the STT is applicable only on Long ITM positions, if you have a short position the STT is already paid when the position is taken. Please check out this post for more details: Starting Sep 1st, finally no more STT trap on exercised options :)