The government announced the decision in parliament on Sunday, saying the tax hike was aimed at curbing high-risk speculative trading in the options market
The government in the Budget presented on February 1 raised securities transaction tax on futures and options
A report by the Securities and Exchange Board of India showed that 91% of retail individual traders incurred net losses in the Futures and Options (F&O) segment during FY 2024-25.
The Budget proposes to increase the STT on futures from 0.02% to 0.05% and options premium to 0.15% from 0.1%
For FY27, the government has estimated that it will collect Rs 73,700 crore via STT, which is lower than the FY26 budget estimate of Rs 78,000 crore for STT collection. The levy has already seen a dip in FY26 due to reduced volumes especially in the F&O segment prompting the government to revise its STT collection estimate for the current financial year downwards to Rs 63,700 crore.
A day after Finance Minister Nirmala Sitharaman announced higher STT on futures and options, Nithin Kamath said he was 'not sure this will do anything' if the stated objective was to reduce speculative activity in the futures and options (F&O) segment.
While the large HFT firms use algos to make massive trades in F&O, arbitrage funds generally interplay between cash and F&O market to make a small profit
To discipline excessive speculation by retail investors, the finance minister could have chosen a non-fiscal path
The stock market selloff post-Budget is understandable as the sharp hike in STT has queered the pitch for traders
STT Hike: Finance Minister Nirmala Sitharaman proposed to increase the STT on Futures from 0.02 percent to 0.05 percent, while hiking the STT on options to 0.15 percent.
Market players are hoping for lower STT, STCG, and with some hoping for the removal of LTCG in the upcoming Union Budget.
STT has seen slower growth this year as investor sentiment turned cautious amid market corrections in September and October.
SEBI has received wide range of suggestions on the proposal to further deepen the cash market volume in equity segment.
Non-corporate tax, which includes individuals and HUFs, mop-up so far this fiscal stood at about Rs 6.55 lakh crore, up from over Rs 5.93 lakh crore in the same period of the last year
The STT collections this year, so far, are approximately Rs 26,300 crore, similar to previous year’s collections around the same time.
STT was introduced in the 2004 Budget by then-Finance Minister P. Chidambaram with an aim to combat evasion related to capital gains.
Nearly 65 percent of the respondents have no plans to revise their Sensex or Nifty targets, post Budget
In what may be indicative of the government's stance on the capital gains tax regime going ahead, Somanathan said, "earners of capital gains are not poor and we will keep taxing them at a decent rate."
Market participants see LTCG/STCG hike as a body blow or the right move, believe STT increase won't deter retail traders
The capital markets regulator and the Economic Survey have raised concerns about the speculative nature of derivatives trading
Budget 2024-25: Market participants are expecting a raise and for it to affect high-frequency traders the most
Asset managers urge the FM to hike STT on high-frequency F&O trades over Rs 1,000 crore to protect retail investors from excessive speculation and losses
Arora argued for easier capital-gains tax regime for foreign investors, even doing away with it entirely for both foreign and domestic investors, while Mantri called that ask "narrow and self-serving".
With the sudden rise in F&O volumes, market participants had been worried that a tax hike to slow down the pace would be introduced
Initially introduced for a short-term period, the STT has become a permanent fixture in the government's income statement