Understanding Commodity transaction tax

28 Feb 2023|

1 min read |

by ICICI Securities Team

Introduction

Whenever you buy any product or service, you are paying a tax for it, which will go to the government. The same applies to commodity trading also in the form of Commodity Transaction Tax (CTT). This tax was introduced in 2013-14 budget by Government of India. It came into force with effect from 1^st July 2013. Commodity Transaction Tax (CTT) is similar to Securities Transaction Tax, which applies for trading in the stock market. Commodity transaction tax is a direct tax where you are paying this tax for each and every trade.

What is commodity transaction tax?

Commodity transaction tax is the tax levied on trading of commodity derivatives i.e., futures and options. This tax is applicable only for sellers of commodity derivatives and this tax is derived by the actual size of the contract.

This tax is applicable on non-agricultural commodities such as gold, silver, crude oil, natural gas, aluminium, copper, lead, nickel and zinc while agricultural commodities are exempted from this tax. Additional to Commodity Transaction Tax (CTT), Commodity derivatives also attract exchange transaction charges, SEBI charges, Goods and Services Tax (GST), and stamp duty from respective state governments where the investor is residing.

Source: Multi Commodity Exchange of India

How Commodity Transaction Tax is Levied

CTT is largely applicable on sale of commodity transactions at the rate mentioned below.

Taxable commodity transaction	Payable on	Rate	Payable by
Sale of a commodity derivative (except exempted agricultural commodities as mentioned below)	Price at which the commodity derivative is traded	0.01 per cent	Seller
Sale of an option on commodity derivative	The option premium	0.05 per cent	Seller
Sale of an option on commodity derivative, where option is exercised	The settlement price	0.0001 per cent	Purchaser

Source: Multi Commodity Exchange of India

To know how CTT and all other applicable charges are calculated while trading Commodities, click here.

Conclusion

An investor should know about CTT and all other applicable charges before trading in Commodities. CTT is the largest component among all those applied charges. Commodity Futures and Options traders can benefit from trading with price movement covering brokerage, exchange transaction charges, SEBI charges, GST, CTT and stamp duty. Earlier, only futures were allowed in commodities and now, options and indices are performing well. Amongst futures, options and indices, options are attracting investors attention therefore the options volumes are growing rapidly exceeding the futures volumes.

Disclaimer

ICICI Securities Limited has its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. The non-broking products / services like iLearn and Financial Learning are not exchange traded products / services and ICICI Securities Ltd. is just acting as a distributor/ referral Agent of such products / services and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism. iLearn is not an exchange traded product/service of ICICI Securities Ltd. All disputes with respect to the activity on the platform would not have access to Exchange investor redressal or Arbitration mechanism.

ICICI Securities Ltd. is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. ICICI Securities Ltd. is a SEBI registered with SEBI as a Research Analyst vide registration no. INH000000990. Name of the Compliance officer (broking): Mr. Atul Agrawal, Contact number: 022-69997051, E-mail address: complianceofficer@icicisecurities.com Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. ICICI Securities Ltd. and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Such representations are not indicative of future results. The securities quoted are exemplary and are not recommendatory. AMFI Regn. No.: ARN-0845. PFRDA registration numbers: POP no -05092018. ICICI Securities Ltd. acts as a Composite Corporate agent having registration number -CA0113. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund, Corporate Fixed Deposits, Bonds, Alternate investment funds, Tax planning, Succession planning, NPS, IPO, Investment Advisory and Loans related services are not Exchange traded products and ICICI Securities Ltd. is acting as a distributor to solicit these products. Please note, Insurance related services are not Exchange traded products and ICICI Securities Ltd. is acting as a corporate agent to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The non-broking products / services like Research, etc. are not exchange traded products / services and all disputes with respect to such activities would not have access to Exchange investor redressal or Arbitration mechanism. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.

Did you enjoy this article?

108 people liked this article. Share Feedback

Recent Articles

View all

Know Your Commodity Before You Trade: Copper

Copper is a widely used base metal known for its electrical and thermal conductivity, strength, ductility and corrosion resistance. It is used across electrical wiring, construction, machinery, power infrastructure and several industrial applications.

245 views

2 minutes

09 Oct 2026

Know your commodity before you trade - Natural Gas

Natural Gas is a widely traded energy commodity used for electricity generation, industrial activity, heating and other applications. Its prices can react sharply to weather, supply and demand, inventories, global energy markets and geopolitical developments.

427 views

1 minutes

30 Sep 2026

Know Your Commodity Before You Trade - GOLD

Gold is more than a precious metal. It is a safe-haven asset, investment avenue, central-bank reserve asset and industrial commodity. For a commodity trader, understanding both Gold's fundamentals and the contract being traded is important.

562 views

3 minutes

23 Sep 2026