Higher STT Backfiring: Zerodha’s Nithin Kamath Says Repeated Tax Hikes Are Hurting Trading Volumes & Revenue Collection

Mumbai: Zerodha co-founder Nithin Kamath has raised concerns over the repeated increase in Securities Transaction Tax (STT), saying that higher taxes are slowly hurting trading activity in the markets. In a recent social media post, Kamath explained that STT was introduced at a time when long-term capital gains (LTCG) tax was removed. However, even after LTCG was brought back, STT has continued to rise with every Union Budget.

He said that as a market participant, he always hopes for a reduction in STT, but instead sees it increasing year after year. “As a market participant, I always hope the budget will reduce STT, but it keeps going up. STT was introduced when LTCG was made 0, but now that LTCG is back,” Kamath said in a post on social media platform X. Kamath highlighted the sharp hike announced in Budget 2024, where STT on futures and options (F&O) trades was raised by 60 per cent.

The tax on futures went up from 0.0125 per cent to 0.02 per cent, while the levy on options increased from 0.0625 per cent to 0.1 per cent. According to him, the impact was not immediately visible because markets were in a strong bull phase and trading activity remained high. “The 60 per cent F&O STT increase from Budget 2024 (0.0125 per cent to 0.02 per cent on futures and 0.0625 per cent to 0.1 per cent on options) didn't impact volumes much at first, the bull market continued with surging participation,” he stated.

“But markets don't always have bull runs; the impact showed up in the year we just had,” he added. However, as market conditions cooled over the past year, the higher STT began to affect volumes. He also pointed to government projections for STT collections in the financial year 2025-26, which were estimated at Rs 78,000 crore. But as of January 11, collections had reached only around Rs 45,000 crore. Even if another Rs 12,000 crore is collected by the end of March, the total would be close to Rs 57,000 crore, falling nearly 25 per cent short of the target. “I think the government would've collected a lot more without the 2024 hike,” Kamath mentioned.

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