STT Hike From April 1: Know What It Means For Futures And Options Traders?

The hike in securities transaction tax (STT) on futures and options (F&O), as announced in the Union Budget 2026-27, will come into effect from April 1, 2026, with the beginning of the new financial year.

The government had announced to raise STT on futures trades to 0.05 per cent from 0.02 per cent. In the options segment, the tax on premiums will increase to 0.15 per cent from 0.1 per cent, while the tax on exercise of options will go up to 0.15 per cent from 0.125 per cent.

Announcing the measures in her Budget 2026 speech, finance minister Nirmala Sitharaman said the hike is aimed “to provide reasonable course correction in the F&O segment in the capital market and generate additional revenues for the government.”

The STT hike comes amid persistent concerns over excessive speculation by traders, especially retail traders. Studies by the Securities and Exchange Board of India (Sebi) have consistently shown that more than 90 per cent of retail participants end up losing money in F&O trading.

The government had earlier raised STT in the 2023 Budget. It increased STT on the sell side of futures trades from 0.01 per cent to 0.0125 per cent, and on the sell side of options contracts from 0.05 per cent to 0.0625 per cent. This hike came into effect from April 1, 2023

STT hike is not the only measure the government is taking to dissuade retail traders from participating in F&O. In November 2024, Sebi had tightened rules in the derivatives segment by introducing measures such as mandatory upfront premium payments, restrictions on certain spread benefits, and stricter exposure limits.

This is a developing story...