The total cost of buying and selling one lot of options rises by about 3 per cent, with STT accounting for roughly 10 per cent of overall trading cost.
The brokerage industry is set to formally approach the government seeking a rollback of the steep increase in Securities Transaction Tax (STT) on derivatives proposed in the Budget, along with a reduction in STT in the cash equity segment, amid concerns that higher trading costs could hurt trading volumes, broker revenues and overall market liquidity.
The Association of National Exchanges Members of India (ANMI) will be submitting two representations to the Finance Minister by Tuesday – one asking for a reversal of the STT hike on futures and options, and another seeking lower STT in the cash market to encourage long-term investing.
“When you want to deepen the market and bring more investors, increasing transaction costs only hurts participants and the ecosystem,” K Suresh, National President, ANMI, told. business line. “The cost of trading is already high in India compared to other markets, making it necessary to lower the tax. At the very least, maintaining the earlier structure will bring some stability back into the market,” he said.
On Sunday, the government proposed the STT on futures contracts to be raised from 0.02 per cent to 0.05 per cent, which doubles STT to around 84 percent of the total cost of trading. Meanwhile, the tax on options premium and exercise has been increased to 0.15 per cent from 0.1 per cent and 0.125 per cent respectively.
Futures hit
The cost impact is expected to be far heavier on futures trading than on options. The total cost of buying and selling one lot of options rises by about 3 per cent, with STT accounting for roughly 10 per cent of overall trading cost. In contrast, the total cost of trading futures nearly doubles, as STT now makes up about 84 per cent of the total transaction cost.
Nithin Kamath, Founder and CEO of Zerodha, said in a social media post that if the aim is to reduce speculation in futures and options, higher STT may not achieve that goal, as the cost impact falls more heavily on futures even though options tend to be more speculative.
“If the government wants to reduce speculation, then establishing product suitability criteria is the way to go. It’s a much better approach than a death by a thousand STT hikes,” Kamath said on
Any sustained fall in futures volumes is expected to directly affect revenues, particularly for broking firms dependent on high derivatives turnover. With futures trading on BSE being negligible, the hit is expected to be minimal there. However, NSE, which earns over 10 per cent of its revenue from futures trading, could face pressure if volumes decline.
Lower transaction costs in the past had helped fuel the explosive growth of India’s derivatives market, with strong retail participation and algorithmic trading pushing volumes to record highs across exchanges.
Published on February 2, 2026