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What will happen if I don't square off my Option contract on expiry day?

The stock options contract will be physically settled if its in the money. For contracts where delivery based physical settlement does not take place, the implication is as follows -

If you have bought options:

  • In the money - STT on exercised contracts will be charged at the rate of 0.125% of intrinsic value (how much in-the-money the option is) and not on the total contract value. Read more in this post on TradingQ&A.
  • Out of the money - OTM option contracts will expire worthlessly. You will lose the entire amount paid as premium .

If you have shorted options:

STT for options is only on the sell-side which means you would've paid STT when initiating the short. So, there will be no STT impact on expiry. Depending on the moneyness of the option contract, you get to keep the premiums received.