New Delhi’s economic circles are buzzing after Chief Economic Adviser V. Anant Nageswaran clarified the true intent behind the Securities Transaction Tax (STT) increase on derivatives trading in the Union Budget 2026-27. Speaking to reporters on Monday, Nageswaran emphasized that the move isn’t about boosting government coffers but protecting household savings from high-risk speculative bets.
“The purpose of raising STT is not revenue generation,” he stated firmly. “It’s to ensure that hard-earned money from households is channeled towards wealth creation rather than speculative trades.” He referenced SEBI’s warnings on how retail investors lose big in futures and options (F&O) segments, where fortunes can vanish in moments.
Finance Minister Nirmala Sitharaman unveiled the budget on Sunday, proposing to hike STT on futures from 0.02% to 0.05%. For options premium and exercise, rates will rise from 0.1% and 0.125% to 0.15% respectively. This adjustment immediately triggered a sell-off in brokerage stocks, underscoring the market’s sensitivity to trading costs.
STT applies to every transaction, making frequent trades—like intraday strategies—costlier. Combined with exchange fees, the overall expense deters excessive churning. Revenue Secretary Arvind Srivastava echoed this, noting that F&O volumes dwarf actual equity markets and GDP, fueled by gambling-like activity that hammers small investors.
“The government’s aim is to discourage speculation and manage systemic risks in derivatives,” Srivastava added. Despite high volumes, he argued the STT rates remain reasonable. Sitharaman herself called it a ‘course correction’ in her speech, hinting at ancillary revenue benefits.
This policy shift signals a broader push to foster prudent investing over thrill-seeking trades, potentially reshaping India’s retail trading landscape for the better.