New Delhi, Feb 01 Finance Minister Nirmala Sitharaman on Sunday announced a sharp increase in the Securities Transaction Tax (STT) on futures and options while presenting the Union Budget 2026-27, significantly raising transaction costs in the derivatives segment.
The STT on futures has been raised to 0.05 per cent from 0.02 per cent, a 150 per cent increase, while the tax on options has been increased to 0.15 per cent from 0.10 per cent, marking a 50 per cent hike.
Market participants attributed the sharp intra-day decline in equities to the higher charges, amid concerns over the impact on derivatives trading activity.
STT is levied on the value of securities transactions executed on recognised stock exchanges and applies to equities, equity mutual funds, and derivatives, including futures and options. The tax is collected at the time of the transaction, irrespective of profit or loss.
Introduced in October 2004 to simplify tax collection and curb evasion following the removal of long-term capital gains tax on equities, STT has remained in force even after the reintroduction of LTCG tax in Budget 2018.
In the previous Budget, the government had also raised capital gains taxes, increasing LTCG to 12.5 per cent from 10 per cent and short-term capital gains to 20 per cent from 15 per cent.
