Chief Economic Advisor V. Anantha Nageswaran stated that the rise in Securities Transaction Tax (STT) on derivatives trading in the Union Budget 2026-27 is intended to protect household savings from risky bets rather than to boost government revenue. The STT hike aims to ensure that savings are utilized to enhance wealth within households, rather than for speculative purposes, as highlighted by SEBI.
The Union Budget 2026-27, unveiled by Finance Minister Nirmala Sitharaman, proposes an increase in STT on futures to 0.05% from the current 0.02%, and on options premium and exercise of options to 0.15% from the current rates of 0.1% and 0.125%, respectively. The market observed a decline in the shares of brokerage-related firms post-budget presentation, attributed to the STT hike.
The adjustments in taxes are structured mechanically, with STT applied per transaction. Hence, a higher rate raises trading costs for participants engaged in frequent buying and selling, impacting strategies like intraday trading that rely on turnover. By elevating the transaction levy, the government adds to the overall cost of derivatives trades alongside exchange fees and other statutory charges.
Revenue Secretary Arvind Shrivastava emphasized that the F&O market’s trading volumes involve significant speculation relative to the country’s GDP or underlying securities market. This speculation leads to substantial losses for retail investors. The STT increase is aimed at curbing speculation and managing systemic risk in the derivatives market, with the rate considered moderate compared to the trading volume.
Finance Minister Sitharaman described the STT adjustment in the budget as a “course correction” in the derivatives segment, expected to bring in additional revenues for the government.
