The central government has proposed an increase in the Securities Transaction Tax (STT) to address the rapidly increasing speculation and systemic risks in Futures and Options (F&O) trading. This announcement was made on Sunday as part of measures to regulate the market more effectively.
Speaking to the media, Revenue Secretary Arvind Srivastava explained that the primary goal behind raising STT on F&O is to reduce excessive speculation and associated systemic risks linked to these transactions.
Under the Budget 2026 proposals, the STT on futures is set to rise from the current 0.02 percent to 0.05 percent. For options, the STT will increase to 0.15 percent.
Additionally, the government has proposed bringing the benefits received by all types of shareholders from share buybacks into the capital gains tax net. This change will result in higher taxation on income arising from buybacks.
During the budget speech, the Finance Minister stated that under the new structure, effective tax rates on buybacks will be around 22 percent for corporate promoters and 30 percent for non-corporate promoters.
The announcement of the STT hike triggered a significant decline in the stock market. By the end of the day, the Sensex fell by 1,546.84 points or 1.88 percent to close at 80,722.94, while the Nifty dropped 495.20 points or 1.96 percent to 24,825.45.
The Nifty Capital Market Index was particularly affected, closing down 5.77 percent. Shares of online brokerage firms Angel One and Grow witnessed declines of up to 10 percent.
Amit Majumdar, Group Chief Strategy Officer at Angel One Limited, noted that in the third quarter of FY 2026, F&O brokerage contributed approximately 44 percent of the company’s total revenue. Interest income from client funding and other platform sources accounted for about 33 percent, with the remainder coming from cash and commodity brokerage, depository services, distribution, and other income streams.
STT is a tax levied on the value of securities transactions executed on recognized stock exchanges in India. It applies to trades involving equity, equity mutual funds, and derivatives such as futures and options, and is collected at the time of the transaction regardless of profit or loss.
Market experts have attributed the intra-day stock market crash to the increase in STT charges.
Akash Shah of Choice Equity Broking said, “This is not a minor change but a significant increase. It is likely to have a direct negative impact on F&O volumes, especially affecting high-frequency traders, proprietary desks, and cost-sensitive trading strategies.”
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