Transaction Taxes on IFSC Exchanges: STT, CTT and Stamp Duty

Transaction taxes on IFSC exchanges affect trading costs and liquidity because they apply to transactions rather than profits. In India, securities transaction tax (STT), commodities transaction tax (CTT) and stamp duty on securities transactions follow different rules for qualifying trades on International Financial Services Centre (IFSC) exchanges compared with domestic exchanges. Understanding these GIFT IFSC transaction tax exemptions requires examining the applicable statutory provisions, rates and conditions.

Securities Transaction Tax

STT is charged under Chapter VII of the Finance (No. 2) Act, 2004. Section 98 sets out the taxable securities transactions and the rates.

Two developments matter as at 17 September 2026.

Rates rose in 2026. The Finance Act, 2026, by section 159 (enacting clause 143 of the Finance Bill, 2026), amended the section 98 table (serial number 4) to increase the rate on the sale of an option in securities from 0.1% to 0.15% of the option premium, on the sale of an option where the option is exercised from 0.125% to 0.15% of the intrinsic price, and on the sale of futures in securities from 0.02% to 0.05% of the traded price. The Notes on Clauses record that these take effect from 1 April 2026.

Chapter VII does not apply to IFSC exchange transactions in foreign currency. Section 113A of the same Act provides that the provisions of Chapter VII shall not apply to taxable securities transactions entered into by any person on a recognised stock exchange located in an International Financial Services Centre, where the consideration for the transaction is paid or payable in foreign currency. The provision was introduced with effect from 1 June 2016.

Two conditions therefore govern the exclusion: the transaction must be on a recognised stock exchange located in an IFSC, and the consideration must be paid or payable in foreign currency. A trade that fails either condition is outside the exclusion.

Commodities Transaction Tax

Commodities transaction tax (CTT) is levied under Chapter VII of the Finance Act, 2013, on specified commodity derivatives transactions on a recognised association. Section 132A provides an exemption for qualifying transactions on a recognised association located in an International Financial Services Centre (IFSC), where the consideration is paid or payable in foreign currency. This exclusion took effect on 1 June 2016.

Like the securities transaction tax (STT) exclusion, this provision is conditional. Qualifying commodity derivatives transactions on an IFSC exchange are excluded from CTT, while transactions on a domestic exchange do not qualify for this specific exclusion.

Verification note: The Gazette text of sections 113A and 132A was not directly available during research. The provisions were checked against reproduced statutory text in published tax commentary, and the Government’s Arthapedia entry on IFSCs confirms that STT and CTT exemptions formed part of the 2016–17 Budget’s IFSC tax package. Readers relying on these provisions for a transaction should verify the current statutory text against the Gazette.

Stamp Duty on Securities Transactions

Stamp duty on securities transactions was centralised by amendments to the Indian Stamp Act, 1899. Section 9A, inserted by Act 7 of 2019 and brought into force on 1 July 2020, provides that:

• on a sale of securities through a stock exchange, stamp duty on each sale in the clearance list is collected by the stock exchange or an authorised clearing corporation from the buyer, on the market value at settlement;
• on a transfer of securities for consideration by a depository otherwise than through such a sale, duty is collected by the depository from the transferor; and
• on a creation or change in depository records pursuant to an issue of securities, duty on the allotment list is collected by the depository from the issuer.

Section 9A(2) charges these instruments at the rates in Schedule I and dispenses with physical stamping. It then carries a proviso, inserted by Act 12 of 2020 with effect from 1 April 2020:

“Provided that no such duty shall be chargeable in respect of the instruments of transaction in stock exchanges and depositories established in any International Financial Services Centre set up under section 18 of the Special Economic Zones Act, 2005.”

Three points follow.

The relief is instrument-specific. It applies to instruments of transaction in IFSC stock exchanges and depositories. It is not a general stamp-duty exemption for entities located in GIFT IFSC.

Collection machinery is displaced along with the charge. Because section 9A operates by making exchanges, clearing corporations and depositories the collecting agents, and because section 9A(3) bars State Governments from charging duty on associated documents for the transactions in section 9A(1), the proviso removes the levy at its point of collection.

Other instruments remain chargeable. Leases of office space, LLP agreements, security documents, powers of attorney and similar instruments executed in Gujarat continue to be governed by the Gujarat Stamp Act, 1958 and the applicable state schedule, unless a specific state exemption applies. Any state-level concession should be confirmed against the relevant Gujarat notification for the period concerned.

Transaction Tax Exemptions on IFSC Exchanges: Key Differences

The currency condition in the first two rows is worth emphasising, because it is easy to overlook in structuring. It attaches to the consideration for the transaction, not to the currency in which the underlying security is denominated or in which the investor’s accounts are maintained.

Equally, these levies are distinct from income tax. A transaction outside STT may still produce taxable capital gains, and the availability of an exemption under Schedule VI of the Income-tax Act, 2025 depends on entirely separate conditions (Article 7). The absence of a transaction tax says nothing about the income-tax treatment of the same trade.

Frequently Asked Questions

1. Are IFSC exchange trades exempt from Securities Transaction Tax (STT)?

Yes. Section 113A of the Finance (No. 2) Act, 2004 excludes qualifying transactions on recognised IFSC stock exchanges where consideration is paid or payable in foreign currency.

2. Is Commodities Transaction Tax (CTT) exempt in GIFT IFSC?

Section 132A of the Finance Act, 2013 provides a similar exclusion for qualifying commodity transactions on recognised associations located in an IFSC, subject to the foreign-currency condition.

3. Is stamp duty exempt on securities transactions in GIFT IFSC?

Yes. Section 9A(2) of the Indian Stamp Act, 1899 provides an exemption for specified transaction instruments involving stock exchanges and depositories established in an IFSC.

4. Do transaction tax exemptions apply to all transactions in GIFT IFSC?

No. STT and CTT exclusions are subject to specific statutory conditions. The stamp duty exemption covers specified transaction instruments, not every agreement or document executed in GIFT IFSC.