STT On Derivatives Raised From Apr 1, Experts See Limited Impact Despite Higher Costs

Mumbai: The government has increased the Securities Transaction Tax (STT) on futures and options (F&O) in the Union Budget 2026–27. The new rates will come into effect from April 1, 2026.

The STT on futures has been more than doubled to 0.05 percent from 0.02 percent. For options, the tax on premiums has been raised to 0.15 percent, while the tax on exercise stands at 0.125 percent. The move is aimed at reducing excessive speculation, especially among retail traders.

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Short-term impact on traders

Experts believe the higher tax will increase trading costs. This could affect retail investors and high-frequency traders the most.

In the short term, trading volumes in the derivatives segment may fall slightly. Many small traders could reduce activity due to higher costs. Brokerages may also see some pressure on revenues as trading volumes soften.

Long-term outlook remains stable

Despite the near-term impact, experts say the overall market is strong. Past trends show that trading activity usually recovers after an initial dip.

Instead of a big fall in volumes, traders may simply change their strategies to manage costs. This means the derivatives market is expected to remain stable over time.

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Shift towards options strategies

Higher costs in futures trading may push traders towards options. Experts say many participants could use options-based strategies to get similar exposure at a lower tax cost.

This shift may change how people trade, but not reduce overall participation in the market.

Recent trends in F&O activity

Data shows that index options volumes have already seen some changes. In March, contracts stood at 234 crore, compared to 259 crore in November 2025, 299 crore in December, and 356 crore in January 2026. February saw a slight dip to 355 crore.

STT On Derivatives Raised From Apr 1, Experts See Limited Impact Despite Higher Costs

The government has raised STT on futures to 0.05 percent and options up to 0.15 percent from April 1. Experts expect a short-term dip in trading activity but no major long-term impact. Traders may shift strategies, while higher taxes aim to curb speculation and boost revenue.