Commodity Transaction Tax (CTT)
Commodity Transaction Tax (CTT) is a tax levied by the government on the trading of certain commodity derivatives executed on recognized exchanges in India.
It works very much like Securities Transaction Tax (STT), but specifically for the commodity market.
Where CTT Applies
CTT is applicable on:
- Trading of commodity futures
- Trading of commodity options (on exercise)
- Transactions executed on recognized exchanges like MCX
It mainly covers non-agricultural commodities, such as:
- Gold, silver
- Crude oil
- Base metals like copper, zinc
Where CTT Does NOT Apply
CTT is not levied on:
- Agricultural commodity derivatives (in most cases)
- Physical trading of commodities
- Off-market transactions
How CTT is Charged
- For futures contracts → charged at the time of sale
- For options → charged when the option is exercised
The tax is calculated as a small percentage of the transaction value.
Who Pays CTT
The trader (buyer/seller, depending on transaction type) ultimately bears the cost.
The exchange collects it and passes it to the government.
Tax Treatment of CTT
Here’s where it matters from a compliance angle:
- If you’re treating commodity trading as business income, CTT can be claimed as an expense
- It is not allowed as a deduction under capital gains
What This Really Means
CTT may look small per trade, but frequent trading can make it a significant cost over time.
Especially for active traders, it directly impacts:
- Net profitability
- Cost per trade
- Overall tax computation
Common Mistakes
- Ignoring CTT while calculating actual trading profit
- Not claiming it as an expense in business income
- Confusing it with brokerage or exchange charges
- Assuming it applies to all commodities
Key Point to Remember
CTT is a transaction-based tax—it applies every time you trade eligible commodity derivatives.
