STT on Futures & Options Hiked in Budget 2026: How New Tax Rates Will Increase Your Trading Costs; Know Detail

Union Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2026 in Parliament on Sunday, February 1, announced a sharp hike in Securities Transaction Tax (STT) on futures and options (F&O) trading, a move that has made short-term speculation significantly more expensive for retail traders.

Budget 2026 Delivers a Big Shock to F&O Traders: STT Hike to Sharply Raise Cost Per Trade; Know How

Under the new proposals, STT on futures trades has been raised from 0.02% to 0.05%, while options trading now attracts a flat 0.15% STT on both option premiums and exercised contracts. The move marks one of the steepest tax increases on derivatives trading in recent years and comes amid a surge in retail participation in the F&O segment.

Why the STT Hike Hurts Small and New Traders the Most

The STT hike disproportionately impacts small investors and beginner traders who operate with modest capital and depend on short-term price movements. Higher transaction costs push up the breakeven point, forcing traders to capture larger market moves just to cover taxes and expenses.

The change also dents the appeal of "quick money" strategies promoted on social media, where viral clips often highlight sudden windfall gains, including reports of traders earning Rs 1.75 crore due to rare broker-side technical glitches.

What is STT and Why It Matters for F&O Traders

STT is a direct tax levied on every buy and sell transaction executed on recognised stock exchanges. Similar to paying a toll at every checkpoint, frequent F&O traders end up paying STT repeatedly, which quickly adds up and erodes overall profitability.

Revised STT Rates on Futures and Options

As per the Budget 2026 proposal, STT on index and stock futures has been increased from 0.02% to 0.05%. For options, the government has removed earlier slab-based rates and introduced a uniform STT of 0.15% on both option premiums and exercised contracts.

How Much More Will You Pay?

The revised rates have sharply increased trading costs. STT for one lot of NIFTY futures has jumped from Rs 325 to around Rs 817. Similarly, STT on a Rs 1 lakh turnover has risen from Rs 20 to Rs 50.

Earlier, a trader paying Rs 325 STT per lot needed a price movement of around 5 points to break even. After the revision, the breakeven cost has risen to nearly 12 points, making small intraday trades far less rewarding.

The hike in STT on options premiums from 0.10% to 0.15% has further increased costs. For example, a NIFTY call option priced at Rs 100 (contract value of Rs 6,500) earlier attracted an STT of Rs 6.50, which has now increased to Rs 9.75 per trade.

"The measured increase in STT on futures and options reflects a clear intent to curb excessive speculation, fostering a more stable market and encouraging sustainable participation from long-term retail and institutional investors," Vishal Kampani - Vice Chairman and Managing Director, JM Financial Ltd.

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