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Budget 2026: STT Charges Hike on Futures & Options – Your Complete Guide
STT rates see major hike: Futures up 150% to 0.05%, Options Premium up 50% to 0.15%. What this means for Angel One Authorised Persons & your clients' strategies.
The Union Budget 2026 has proposed amendments to the Securities Transaction Tax (STT) levied on Futures and Options contracts traded on recognized stock exchanges in India. Futures move from 0.02% to 0.05%, Options (sale) from 0.10% to 0.15%, and Options (exercise) to 0.15%. These changes are proposed and will become effective only after parliamentary approval and CBDT notification.
Budget 2026: Understanding the Securities Transaction Tax Hike on Futures & Options
Budget 2026: Major STT Hike on Derivatives – Your Complete Guide as an Angel One Authorised Person.
The Union Budget 2026 has proposed amendments to the Securities Transaction Tax (STT) levied on Futures and Options contracts traded on recognized stock exchanges in India.
These changes are proposed and will become effective only after parliamentary approval and CBDT notification.
Summary of Proposed Changes
| Instrument | Previous Rate | Proposed New Rate | Basis of Levy |
|---|---|---|---|
| Futures Contracts | 0.02% | 0.05% | On sell side transaction value |
| Options Contracts (Sale) | 0.10% | 0.15% | On premium value |
| Options (Exercise) | 0.125% | 0.15% | On strike price |
The revised STT structure for the derivatives segment is outlined below:
STT is levied only on the sell side for Futures and Options (except on exercise, where it is levied on the buyer).
Detailed Breakdown
1. Futures Contracts
Scope: Applies to all futures contracts (index and stock futures). Change: Rate increase of 0.03 percentage points. Calculation: Tax payable by the seller on the total contract value. STT is charged only at the time of exit (sell transaction).
2. Options Contracts
A. Sale of Options
Applies when an options contract is sold. Tax levied on the total premium received by the seller. Rate increase of 0.05 percentage points. Applicable to option writers (sellers) only.
B. Exercise of Options
Applicable when an options contract is exercised. Tax calculated on the strike price of the exercised contract. Rate aligned to 0.15%, resulting in an effective increase of 0.025 percentage points.
Illustrative Impact Scenarios
Futures Transaction Example
Contract: 1 Nifty Futures lot at ₹20,00,000 value. Previous STT: ₹400 (0.02% of ₹20,00,000). Revised STT: ₹1,000 (0.05% of ₹20,00,000). Difference: +₹600 per lot. Impact increases proportionally with higher turnover and frequent trading.
Options Transaction Example
Transaction: Sale of 1 Bank Nifty Call Option at ₹200 premium. Premium value: ₹3,000 (15 units × ₹200). Previous STT: ₹3 (0.1% of ₹3,000). Revised STT: ₹4.50 (0.15% of ₹3,000). Difference: +₹1.50 per contract. Higher impact for option sellers with large volumes or short-term strategies.
Regulatory Context
STT is a direct tax levied on transactions involving securities listed on Indian stock exchanges. The tax applies to both purchase and sale transactions, though rates differ by instrument type and transaction side. In derivatives, STT is primarily levied on the sell side, except in case of option exercise.
The proposed revisions represent an adjustment to the existing STT framework, which was last modified in previous budget cycles. The changes are subject to parliamentary approval and subsequent notification by the Central Board of Direct Taxes (CBDT).
Implementation Timeline
The proposed rates are intended to take effect from the beginning of the next financial year (April 1, 2026), pending legislative approval and notification. Transitional provisions, if any, will be specified in the Finance Act, 2026. Trades executed before the effective date will continue to attract existing STT rates.
Additional Considerations
- STT on Equity Delivery Transactions: Rates remain unchanged for cash market transactions
- STT on Equity Intraday Transactions: No revision proposed
- Carry Forward Provisions: Existing provisions for STT treatment in income tax calculations continue unchanged
- International Comparison: The revised rates maintain India's position within the range observed in global markets with financial transaction taxes
- Higher STT may marginally impact high-frequency and option-selling strategies.
Frequently Asked Questions
What exactly is STT?
Securities Transaction Tax (STT) is a direct tax levied on the value of transactions involving securities (such as shares, derivatives, mutual fund units) executed on recognized stock exchanges in India.Which transactions are affected by the new rates?
The revised rates apply specifically to: Futures contracts (both index and stock futures), and Options contracts (both sale and exercise).Is STT also increased for equity (cash market) transactions?
No. The Budget 2026 proposal does not change STT rates for delivery-based or intraday equity transactions. The revision applies only to the derivatives segment.When will the new STT rates become effective?
The proposed rates are intended to be effective from April 1, 2026, subject to parliamentary approval and official notification.How is STT calculated on Futures under the new rates?
STT on Futures = 0.05% × Total Contract Value. It is payable by the seller at the time of sale.How is STT calculated on Options under the new rates?
On Sale: 0.15% × Total Premium Value (payable by seller). On Exercise: 0.15% × Strike Price × Quantity (payable by buyer on exercise).Will this affect the tax treatment of derivative income?
The increase in STT rates does not alter the fundamental tax treatment of derivative transactions. Income from such transactions continues to be treated as business income (speculative or non-speculative based on turnover and other factors). However, higher STT will increase transaction costs and reduce net profitability.Are there any changes to STT on mutual funds?
No change has been proposed for STT on equity-oriented mutual fund transactions in this budget.Where can I find the official notification?
The final notification will be published by the Central Board of Direct Taxes (CBDT) after the Finance Bill, 2026 is passed by Parliament. It will be available on the Income Tax Department,s website.Do the new rates apply to commodity derivatives?
No. STT applies only to securities transactions. Commodity derivatives traded on recognized exchanges are not subject to STT.
