STT hike on F&O in Budget 2026: Income Tax Department issues clarification — ‘More than 500 times of GDP’

Budget 2026 STT announcement: The Income Tax Department on Sunday clarified about the new STT rules on F&O announced by Finance Minister Nirmala Sitharaman in Budget 2026.

Presenting her ninth consecutive Budget on Sunday, 1 February, FM Nirmala Sitharaman proposed to hike the Securities Transaction Tax (STT) on futures and options (F&O) trading.

“I propose to raise the STT on Futures to 0.05% from present 0.02% options premium and exercise of options are both proposed to be raised to 0.15% from the present rate of 0.1% and 0.125% respectively,” she said during her Budget 2026 speech today.

Income Tax Department issues clarification on STT hike on F&O

Shortly after FM Nirmala Sitharaman's speech, the income tax department explained the STT hike on F&O trading while giving clarification on why it was increased.

Issuing a clarification, the income tax department said STT has been raised only on options and futures, and not other segments.

The STT rate for futures now is 0.05% and for options is 0.15%, it said.

Giving the government's rationale behind the STT increase, the department said that the total volume of transaction in the F&O segment is a massive 500 times of the Indian GDP, which stands at ₹300 lakh crore.

Volume for options and futures is more than ₹1.5 lakh lakh crore, it said.

“Therefore there is justification for increase in rates to curb purely speculative activity in options and futures,” the income tax department said.

In the post-Budget press conference on Sunday, Revenue Secretary Arvind Shrivastava said that the STT hike on F&O trading is “intended to discourage speculative tendencies, handle systemic risk in derivatives market.”

FAQs on STT hike

The income tax department also released a list of FAQs on the STT hike on F&O transactions.

1. What is the current rate of STT on futures in securities?

Under the existing provisions of the Income Tax Act, 2025, and the STT framework of Finance (No. 2) Act, 2004, STT is levied on transactions in specified securities carried out through recognised stock exchanges. The current rates applicable to options in securities are 0.1% of the option premium on sale of an option and 0.125% of the intrinsic price on sale of an option when exercised.

2. What are the changes on STT on derivatives transactions?

Budget 2026 has revised the STT applicable to specified derivatives transactions carried out on recognised stock exchanges. The revised rates apply to the sale of options in securities, sale of options in securities where the option is exercised, and sale of futures in securities.

3. What are the revised STT rates on F&O transactions?

STT on futures contracts would be raised to 0.05% from 0.02%. STT on options premium and exercise of options will be raised to 0.15% from the present rate of 0.1% and 0.125% respectively.

4. When will the new STT rules come into effect?

The revised STT rates on F&O transactions will take effect from 1 April, 2026. The new rates will apply to derivatives transactions in securities entered into on or after that date, the Income Tax Department said.