Home/ Markets / Stock Markets/  Why F&O trading will attract more tax from next month — explained

F&O trading: The Future & Option (F&O) trading is going to cost more from 1st April 2023 as Finance Bill 2023 amendment has provision to raise Security Transaction Tax (STT) on sale of options and futures. The Finance Bill 2023 amendment tabled and passed by Lok Sabha on Wednesday informs that STT applicable on sale of options has been raised by 25 per cent to 6,250 from existing 5,000 against 1 crore turnover. The new STT will become effective from 1st April 2023 i.e. from the beginning of new financial year or say FY24.

What Finance Bill 2023 amendment says

According to the Finance Bill amendment 2023, STT on the sale of options has been hiked to 6,250 on 1 crore of turnover that levies 5,000 in current tax regime. On the options side, the STT is charged on premium and not the strike price.

On how this move will impact F&O trading in India, Shrey Jain, Founder and CEO, at SAS Online said, “The move may not have direct impact on retail traders, for scalpers Arbitrageurs and HFT (High Frequency Trading) firms transaction expense goes up by 25 per cent which directly impacts their margins and bottom lines. Also, more than 90 per cent volume in Indian Markets originate from Scalpers, Arbitrage houses and HFT firms. Increase in their cost of trading in markets may impact the overall volumes and spreads for retail may go up."

Double blow to F&O trading

Speaking on the rise in STT on F&O trading, Avinash Gorakshkar, Head of Research at Profitmart Securities said, "The move is a double blow for high frequency F&O traders. Recently, NSE announced to scrap 'do not exercise' facility that is going to impact F&O traders at a larger extent as auto settlement won't remain available for F&O traders from April expiry. Now, this rise in STT on F&O trading is going to further dent the morale of high frequency F&O traders and it will have negative impact on F&O trade volume."

Avinash Gorakshkar said that raising the STT in F&O segment should have come at the time of tabling of the Union Budget not in the Finance Bill 2023 amendment.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

Asit Manohar
Chief Content Producer at Live Mint Digital Team
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Updated: 25 Mar 2023, 06:59 AM IST
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