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STT Hike Aims to Protect Household Savings from Risky Bets, Says CEA

Chief Economic Advisor V. Anantha Nageswaran stated the hike in Securities Transaction Tax on derivatives is primarily intended to safeguard household savings from highly speculative trading, a concern also highlighted by SEBI. The Budget 2026-27 proposed raising STT rates on futures and options transactions, which led to a sell-off in brokerage stocks. Revenue Secretary Arvind Shrivastava echoed that the F&O market's speculative volume relative to GDP causes significant retail losses, and the increase is a modest measure to manage systemic risk. Finance Minister Nirmala Sitharaman described the change as a necessary "course correction" that will also generate additional government revenue.

Key Points: STT Hike to Curb Speculation, Protect Savings: CEA

  • STT hike targets speculative derivatives trading
  • Aim is to protect household savings, not just revenue
  • SEBI flagged retail losses in F&O
  • Market crash hit brokerage stocks
  • Government calls it a "course correction"
2 min read

STT hike to secure household savings from speculative bets: CEA Anantha Nageswaran

CEA Nageswaran says STT increase in Budget 2026-27 aims to secure household savings from speculative F&O trading, not just raise revenue.

"The purpose is to ensure hard-earned savings are used to maximise wealth in households. - V. Anantha Nageswaran"

New Delhi, Feb 2

Chief Economic Advisor V. Anantha Nageswaran said on Monday that the increase in Securities Transaction Tax on derivatives trading announced in the Union Budget 2026-27 is aimed at securing household savings from highly speculative bets rather than generating revenue for the government.

"The purpose (of STT hike) is not revenue generation... the purpose is to ensure hard-earned savings are used to maximise wealth in households. The SEBI has pointed out how people lose money through F&O," the CEA told journalists.

The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman on Sunday, proposed raising STT on futures to 0.05 per cent from the present 0.02 per cent and on options premium and exercise of options to be raised to 0.15 per cent from the present rate of 0.1 per cent and 0.125 per cent, respectively.

The stock market crash in the shares of brokerage-related companies after the presentation of the Budget was attributed to the hike in STT.

The tax changes are mechanical in design. The STT applies per transaction, so a higher rate increases the cost of trading for participants who buy and sell frequently, including intraday strategies that rely on turnover. By raising the transaction levy, the government increases the all-in cost of derivatives trades alongside exchange fees and other statutory charges.

Similarly, Revenue Secretary Arvind Shrivastava also said, after the presentation of the budget, that "the volumes in the F&O market are in the realm of heavy speculation when compared to the size of the country's GDP or underlying securities market".

"This results in huge losses to retail investors. The government's intention is to discourage speculation. The increase in STT is meant to handle the systemic risk in the derivatives market. The rate is still modest compared to the volume," he added.

Sitharaman said, in her budget speech, that the STT change was a "course correction" in the derivatives segment and it would also "generate additional revenues" for the government.

- IANS

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Reader Comments

R
Rohit P
As a small investor, I appreciate the intent. But this feels like a blanket punishment. Why not better financial literacy campaigns instead? Now my legitimate hedging strategies in options will also become more expensive.
A
Arjun K
The CEA is spot on. The volumes in F&O are insane compared to our market cap. It's pure speculation. My cousin lost his bonus chasing weekly options. This tax might make people think twice before placing a trade.
S
Sarah B
Interesting perspective from India. In Western markets, we rely more on capital gains taxes and stricter margin rules to curb speculation. A transaction tax is a more direct approach. Will be watching to see if it cools the frenzy.
V
Vikram M
Brokerage stocks crashed for a reason. Their business model thrives on high churn. If this move saves middle-class families from losing their savings in speculative bets, it's a good policy. Long-term investing in solid companies is the way.
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Karthik V
They say it's not for revenue, but the FM also said it will "generate additional revenues". Which is it? Feels like a clever way to increase tax collection under the guise of investor protection. The cost will ultimately be borne by all traders, not just speculators.

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