Flat STT mop-up raises doubts over ambitious Rs 78,000-crore target, say experts

In the Union Budget for FY26, the government pegged STT receipts at Rs 78,000 crore

Securities Transaction Tax (STT) collections have remained almost unchanged year-on-year at around Rs 26,300 crore so far in FY26, raising concerns over the government’s ability to meet its annual target of Rs 78,000 crore. Tax experts said unless there is a significant uptick in market volumes or a policy-level push, the ambitious collection target may be difficult to achieve.

Attributing the muted trend to a mix of market and regulatory factors, experts noted that volatility in stock markets as well as recent changes in the futures and options (F&O) segment have weighed on trading activity. They cautioned that with only about 33 percent of the annual target achieved in the first five-and-a-half months of the fiscal year, collections may fall short unless activity surges in the coming months.

“The STT collections this year, so far, are approximately Rs 26,300 crore which is approximately the same as compared to the last year (same period). Given this, unless there is a strong surge in trading activity or structural changes, the target of Rs 78,000 crore appears quite ambitious. The volatility in the stock market is one of the reasons but not the only one. Regulatory changes in derivative markets also contribute to the decline in collections,” Akash Uppal, Partner at BDO India, told Moneycontrol.

Recent SEBI measures to tighten risk management in the F&O market – such as larger contract sizes, stricter position limits, and enhanced intraday risk controls – have curbed speculative volumes, moderating the pace of collections, they said.

Whether the ambitious target is achieved will now hinge on market stability, investor sentiment, and the adaptability of traders to the new regulatory regime in the months ahead, experts said.

Investor sentiment critical

Rajat Mohan, Partner at AMRG, pointed out that the steep increase in the target reflected the government’s confidence in the stock markets. “The steep jump in the STT target showed just how much faith the government has in India’s stock markets to deliver. Hitting this number is possible, but it really depends on how confident and active investors feel. When markets are steady, people trade more and collections rise. But if there’s too much turbulence for too long, many investors tend to pull back, and that can slow the pace of collections,” he said.

Rahul Jain, Partner at Khaitan & Co, highlighted the link between STT and market activity. “STT is essentially linked to the volume of activity on the exchanges. Each buy and sell of listed shares and securities is subject to STT at the applicable rates. The first half of the year has remained a bit volatile due to global uncertainties. One could expect stability in the upcoming months and with developments such as rationalisation of GST rates and pipeline of initial public offers, trading activity could see an uptick, boosting STT collections further,” he noted.

Amit Maheshwari, Tax Partner at AKM Global, pointed out that while the government’s overall direct tax receipts are growing, STT collections remain subdued. “Securities Transaction Tax (STT) collections in FY 2025-26 are lagging behind the ambitious budget target of Rs 78,000 crore, against Rs 53,095 crore collected last year. Till mid-September, growth has been modest at just 0.6 percent year-on-year, indicating a potential shortfall, if the current trend persists. The slower growth reflects a mix of market and regulatory factors. On one hand, volatility and uneven equity trading volumes have constrained inflows. On the other hand, recent measures introduced by SEBI to strengthen the futures and options (F&O) framework … have tempered derivative volumes, traditionally a key driver of STT revenue,” he said.

Growth momentum

Adding a longer-term perspective, Amit Singhal, Founding Partner at Shwetapatra LLP, said recent growth in STT is unlikely to be repeated this year. “In FY 2023-24, actual STT collected was around Rs 33,778 crore. FY 2024-25 saw significant growth which seems very difficult in FY 2025-26, if not impossible. As of September 17, STT collection is Rs 26,305 crore and current collection target is Rs 78,000 crore. It is evident that only 33 percent of the target has been achieved even after 5.5 months. It seems the current STT collection and growth this year is not on track to meet the budget target due to domestic and global headwinds including volatility in the stock market. It is interesting to note that FY 2024-25 witnessed significant growth of approximately 63 percent over the immediate preceding year,” he told Moneycontrol.

STT, levied on the purchase and sale of listed shares and securities, has become a significant source of revenue in recent years, aided by rising retail participation and buoyant derivatives trading.