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STT Hike Targets F&O Speculation, Spares Other Trades: Tax Dept

The Income Tax Department has clarified that the proposed hike in Securities Transaction Tax applies exclusively to futures and options trades, leaving rates for other securities transactions unchanged. The department justified the increase by noting the massive trading volume in derivatives, which it states is over 500 times the size of India's GDP, aiming to curb speculative activity. The revised rates, which see increases from 0.1% to 0.15% on options and 0.02% to 0.05% on futures, will take effect from April 1, 2026. STT is a direct cost on trading, impacting frequent traders and arbitrageurs in the derivatives market.

Key Points: STT Rate Hike Only for Futures & Options, Clarifies Tax Dept

  • STT hike targets F&O speculation
  • Other securities trades unaffected
  • New rates effective April 1, 2026
  • F&O volume over 500 times India's GDP
2 min read

Except F&O, STT rates remain same for others: Income Tax Dept on rate hike

Income Tax Dept clarifies STT hike applies only to futures & options trades to curb speculation. Other transaction rates remain unchanged from April 2026.

"Except futures and options, STT rates remain same for others. - Income Tax Department"

New Delhi, February 1

As the Union Finance Minister Nirmala Sitharaman on Sunday proposed a significant hike in Securities Transaction Tax on futures and options trades, the Income Tax Department issued a clarification on the hike in Securities Transaction Tax on futures and options trades and said, "Except futures and options, STT rates remain same for others."

It said the total volume of transaction in options and futures is more than 500 times of Indian Gross Domestic Product (GDP) and there was a justification to curb speculation.

"In Rupee terms, our GDP is 300 lakh crore rupees, while the volume for options and futures is more than 1.5 lakh lakh crore rupees. Therefore, there is justification for increase in rates to curb purely speculative activity in options and futures," the Income Tax Department said in a post on social media platform X.

Attaching FAQs on the issue, the department said, "The rate of STT on the sale of an option in securities has been increased from 0.1 per cent to 0.15 per cent, the sale of an option in securities where the option is exercised has been increased from 0.125 per cent to 0.15 per cent while the rate of STT on the sale of a future in securities has been increased from 0.02 per cent to 0.05 per cent."

The revised rates shall take effect from the 1st day of April, 2026 and shall apply to derivatives transactions in securities entered into on or after that date, it said.

Notably, the current rates applicable to options in securities are 0.1 per cent of the option premium on sale of an option and 0.125 per cent of the intrinsic price on sale of an option when exercised. The current rate applicable to futures in securities is 0.02 per cent of the traded price on sale of a future.

Securities Transaction Tax is a small levy charged by the government on every buy or sell transaction in the stock market, including shares, futures and options. While it may appear modest, STT directly increases the cost of trading, particularly for frequent traders, hedgers and arbitrageurs.

- ANI

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Reader Comments

P
Priya S
As a small-time investor who occasionally uses options for hedging, this increase will pinch. While I understand the need to curb pure speculation, it also affects those using derivatives for legitimate risk management. Hope the government keeps reviewing such policies.
R
Rohit P
Good move! So many young people are getting into F&O thinking it's easy money, only to lose their savings. The '500 times GDP' stat is shocking. This tax might discourage some of the reckless trading. Focus should be on building wealth slowly.
M
Michael C
Interesting policy. Targeting speculation while leaving regular equity transactions untouched is a balanced approach. The 2026 implementation gives market participants time to adjust. Clarity from the Income Tax department is appreciated.
S
Siddharth J
The increase from 0.02% to 0.05% on futures seems reasonable, but will it really curb speculation? Big players might not care, while retail traders will feel the heat. Also, where is this additional tax revenue going to be used? Some transparency would help.
N
Nisha Z
Finally! My brother lost a lot of money in options trading last year. These Instagram 'gurus' make it sound so easy. Maybe higher costs will make people think twice before jumping in. Protect the common man's hard-earned money. 🙏

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