STT Hike Applies Only to Options and Futures, I-T Dept Clarifies

Moneylife Digital Team 01 February 2026

Investor Interest

The income tax (I-T) department on Sunday issued a clarification on the increase in securities transaction tax (STT) on derivatives, stating that the higher rates apply only to futures and options (F&O) transactions (sale and exercise), while all other STT rates remain unchanged. "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," it says.

In a post on social media platform X, the department says the increase is justified given the extraordinarily high volume of speculative trading in the derivatives market, particularly in options and futures.

“STT has been raised only on options and futures. The rate for futures now is 0.05% and for options is 0.15%. Other STT rates remain the same,” the department says.

KIND ATTENTION PLEASE:
??STT has been raised only on options and futures.
??The rate for futures now is 0.05 and for options is 0.15
??Total volume of transaction in options and futures is more than 500 times of Indian GDP
??In Rupee terms, our GDP is 300 lakh crore rupees.…
— Income Tax India (@IncomeTaxIndia) February 1, 2026

Explaining the rationale behind the move, the tax department pointed to the sheer scale of derivatives trading in India. According to the post, the total volume of transactions in options and futures is more than 500 times India’s gross domestic product (GDP).

The clarification comes amid concerns among retail traders about the impact of the higher levy on trading costs.

Under the revised provisions introduced through the Finance Act, STT rates on derivatives have been increased as follows:

Options (sale): STT has been raised from 0.1% to 0.15%, calculated on the option premium.

Options (on exercise): STT has been increased from 0.125% to 0.15%, calculated on the intrinsic value.

Futures (sale): STT has been raised from 0.02% to 0.05%, calculated on the traded price.

The department clarified that the revisions apply only to specified derivatives transactions carried out on recognised stock exchanges.

As per the official FAQs issued by the tax department, the revised STT rates will come into force from 1 April 2026 and will apply to derivatives transactions entered into on or after that date.

The I-T department stressed that STT rates for other securities transactions, including equity delivery and non-derivative trades, remain unchanged, countering speculation that the tax hike would affect the broader equity market.

Market participants say the clarification is significant, as retail participation in options trading has surged sharply in recent years, often driven by short-term speculative strategies.

The government’s messaging suggests that the higher STT is not a revenue-only measure but also a policy signal to rein in excessive speculative activity in the derivatives segment, which regulators have flagged as a growing risk for retail investors.

Comments