The Finance Bill, 2026 proposes a significant increase in Securities Transaction Tax (STT) on derivatives transactions to curb excessive speculation in the futures and options market. STT, introduced in 2004 to ensure efficient and transparent tax collection on exchange-traded securities, has been periodically adjusted to align with evolving market conditions. Considering the sharp growth in derivatives volumes and trading intensity, the government has proposed revising rates under section 98 of the Finance (No.2) Act, 2004. Under the proposal, STT on the sale of options will increase from 0.1% to 0.15% of the option premium, while STT on options exercised will rise from 0.125% to 0.15% of the intrinsic value. Further, STT on futures contracts will be enhanced from 0.02% to 0.05% of the traded price. These changes will apply to transactions entered into on or after 1 April 2026 and take effect from tax year 2026–27 onwards.
Increase in tax rates of Securities Transaction Tax
Securities Transaction Tax (STT) was introduced by the Finance (No. 2) Act, 2004 as a mechanism for efficient collection of tax on transactions in specified securities carried out through recognised market infrastructure. Under the STT framework, the obligation to collect and deposit the tax is placed on recognised stock exchanges, mutual funds in respect of equity-oriented schemes, insurance companies, or lead merchant bankers, as applicable. Over time, STT has become an integral component of the securities market ecosystem and supports the policy objective of promoting transparent, exchange-traded transactions.
2. The rates of STT have been revised periodically to reflect changes in market structure and trading behaviour. In view of the scale and depth achieved by the derivatives market, it is considered appropriate to undertake a calibrated revision of the applicable rates of STT on options and futures transactions.
3. It is proposed to increase the rate of STT on sale of an option in securities from 0.1 per cent to 0.15 per cent of the option premium, on sale of an option where the option is exercised from 0.125 per cent to 0.15 per cent of the intrinsic price, and on sale of a future in securities from 0.02 per cent to 0.05 per cent of the traded price. This will address issue of disproportionate increase in speculation in futures and options trading.
4. These amendments shall take effect from the 1st day of April, 2026, and the revised rates shall apply to transactions in options and futures in securities entered into on or after that date.
[Clause 143]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 143 of the Bill seeks to amend section 98 of the Finance (No.2) Act, 2004 relating to charge of securities transaction tax.
The said section, inter alia, provides that the securities transaction tax on sale of––
i. an option in securities is 0.1 per cent. of the option premium;
ii. an option in securities when such option is exercised is 0.125 per cent. of the intrinsic price; and
iii. a futures in securities is 0.02 per cent. of the price at which “futures” are traded.
It is proposed to amend the said section so as to increase the said rates from the existing rate of securities transaction tax on sale of––
i. an option in securities to 0.15 per cent. of the option premium;
ii. an option in securities, where option is exercised to 0.15 per cent. of the intrinsic price; and
(iii) futures in securities to 0.05 per cent. of the price at which such “futures” are traded.
These amendments will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-2027 and subsequent years.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
143. Amendment of Act 23 of 2004.
In the Finance (No.2) Act, 2004, in section 98, in the Table, against serial number 4,––
(i) against entry (a) relating to sale of an option in securities, in column (3), for the figures and word “0.1 per cent.”, the figures and word “0.15 per cent.” shall be substituted;
(ii) against entry (b) relating to sale of an option in securities, where option is exercised, in column (3), for the figures and word “0.125 per cent.”, the figures and word “0.15 per cent.” shall be substituted;
(iii) against entry (c) relating to sale of a futures in securities, in column (3), for the figures and word “0.02 per cent.”, the figures and word “0.05 per cent.” shall be substituted.
