India Budget 2026: Capital market participants hit by increase in STT

The government’s hike in STT on F&O is set to hurt derivatives turnover

What Budget proposed?

The Union Budget 2026 has raised the STT (securities transaction tax) on Futures to 0.05 percent from present 0.02 percent. STT on options premium and exercise of options are both proposed to be raised to 0.15 percent from the present rate of 0.1 percent and 0.125 percent respectively.

Why the hike in STT?

There has been rising chatter that the government is exploring measures to curb the surge in retail participation in derivatives trading over the past couple of years. Last year, SEBI warned that nearly 9 out of 10 options traders lose money. The Budget announcement follows repeated cautions over an “unchecked explosion” in retail F&O activity and a series of regulatory actions by SEBI.

Who will be impacted the most?

The government’s hike in STT on F&O is set to hurt derivatives turnover by making F&O less attractive for retail traders. This will directly dent trading volumes and profitability for exchanges. BSE, which has rapidly gained F&O market share since April 2023, is vulnerable to volume-led earnings hit, while NSE too faces near-term negatives as it prepares for its IPO even though it has a very big presence in cash equity market segment which will not be impacted by the Budget.   Investors should note that SEBI has been contemplating to potentially scrap weekly options which could be another blow for exchanges.

The impact will be more severe for brokers—particularly discount brokers that are heavily dependent on retail derivatives activity. After regulatory tightening in past 18 months, the latest Budget adds another layer of policy overhang, intensifying concerns for the broking industry.

With discount brokers now commanding 76–78% of active NSE clients in FY25 (up from ~40% in FY20 and under 10% in FY15), this segment stands to lose the most from the Budget measures. Listed players such as Angel One and newly listed Billionbrains Garage Ventures (Groww) are likely to be hit harder.

Who will be impacted less?

Wealth managers like 360 ONE Wealth that have diversified revenue stream consisting more of distribution income will be least impacted as broking income forms small portion of their revenue.