Budget 2026: STT on Futures increased to 0.05% and options to 0.15%, buyback tax for retail investors reduced

. A study by Sebi in 2025 showed over 90% of retail investors were making losses in the F&O market.

The Union Government 2026 has proposed to raise taxes on Futures and Options Market(F&O) while selectively reducing buyback taxes. In the Budget Speech for FYH2627, the government announced increasing the STT rate on futures from 0.02% currently to 0.05%. While the STT on options is being increased from 0.1% to 0.15%. The move will impact several large High Frequency Traders (HFT) and wealthy investors who are major players in India's derivatives market.

The development comes as several regulators have been expressing concerns on over speculation  in the Indian derivative markets. A study by Sebi in 2025 showed over 90% of retail investors were making losses in the F&O market. Sebi has already tightened the market participation rules in the F&O market.

The government also provide relief to individual investors who participate in buybacks, although the proposal also increases the tax rate on buybacks for promoters. Currently, all investors: promoters and non-promoters are subject to 20% tax rate on gains made through buybacks. Now, government has proposed to allow individual investors to categorize buyback gains as capital gains in their tax filings. This means, they will be subject to 12.5% tax rate for shares held over one year against current 20%. However, promoters participating in buybacks would be subject to 22% tax if they are structured as corporate while it is 33% for promoters who are non-corporates.

“It is proposed to reduce Buyback tax is being reduced for minority investors by allowing the gains to be categorized as capital gains. However, to disincentivize any tax arbitrage, promoters who are corporates will be subject to 22% tax while non-corporate promoters will be taxed at 33% for buybacks.” Said finance minister Nirmala Sitharaman in the Union Budget for FY27.