This was an announcement made in the Union Budget in July and is now being implemented from September 01. The STT is normally levied on both sides of a delivery trade in the market and only on the sell-side of intraday and derivatives trades. This is to keep costs low. However, in case of buy options held to expiry, an exception was made in STT calculation. You need to understand this anomaly in greater detail.

STT on options have been always charged at a concessional rate as it is on the premium value rather than on the notional value. This had made options attractive to traders. An exception was when you allowed In-The-Money (ITM) options to expire on F&O expiry day. In that case, it would be treated as a delivery trade. That means the delivery STT rate of 0.125% was charged on the notional value of the option. For example, if you held a call option on an Rs.1000 strike price having lot size of 1000 shares, then the contract value would be Rs.10 lakhs. If the stock expired at Rs.1005, on F&O expiry, it would be treated an ITM option (as market price > strike price). If you had left this option to expiry you would up pay STT of Rs.1250 (10 lakhs x 0.125%). Under the new STT formula, you have to pay 0.125% on the moneyness of the option i.e. Rs.6.25. Effective the STT cost of ITM options is down by 95%. That is the difference.