Chief Economic Advisor V. Anantha Nageswaran said 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.
