STT Hike Explained: Why Government Raised F&O Taxes Spooking Indian Markets

• Revenue Secretary Arvind Shrivastava stated the STT hike on F&O aims to discourage speculation and manage systemic risk in derivatives.
• The Union Budget 2026-27 proposes increasing STT on futures from 0.02% to 0.05%, and on options premium/exercise to 0.15% from 0.1%/0.125%.
• The government believes heavy speculation in F&O often leads to losses for small investors, making the hike a measure to curb this.
• Indian equity markets, including Sensex and Nifty 50, experienced a sharp sell-off after the STT hike announcement in the Budget.
• Experts suggest the hike will increase transaction costs for derivatives traders, potentially leading to lower volumes and near-term market volatility.

Why It Matters: The government increased STT on F&O to curb speculation and systemic risk, causing a market sell-off.