Securities Transaction Tax Hiked on Derivatives to Curb Speculative Trading and Promote Long-Term Investment
Finance Minister Nirmala Sitharaman introduced significant changes to the taxation of securities and investments in the Union Budget 2026-27. The Securities Transaction Tax (STT) on Futures has been increased from 0.02% to 0.05%, while the STT on Options has been raised to 0.15%. This move is intended to reduce short-term speculative trading and high-frequency trading in the derivatives segment, encouraging retail investors to adopt more measured, long-term investment strategies. Additionally, the budget rationalized taxation on share buybacks, treating them as capital gains, and increased investment limits for non-resident Indians (NRIs).
Key Points
- STT on Futures increased from 0.02% to 0.05% to discourage excessive speculation.
- STT on Options raised to 0.15% from previous rates of 0.1% and 0.125%.
- The hike aims to curtail retail participation in high-risk derivatives and promote long-term equity investment.
- Buybacks will now be taxed as capital gains: 20% for short-term and 12.5% for long-term gains.
Exam Facts
- STT on Futures: 0.05%.
- STT on Options: 0.15%.
- Buyback tax: 20% (STCG), 12.5% (LTCG).
- NRI investment limit: Increased to 10% for individuals and 24% overall.
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