The Budget 2026 STT hike may appear insignificant at first. After all, the hike in derivatives STT is measured in basis points. However, for retail traders who actively trade in futures and options (F&O), this change quietly raises the overall trading costs and directly impacts their profitability, especially for high-frequency and short-term strategies.
How? We will explain.
Securities Transaction Tax is a government levy charged on trades executed on recognised exchanges such as the NSE and BSE. It applies to equities, futures, and options, and is usually collected on the sell side of a trade.
In Budget 2026, the government increased STT rates on derivatives trading. While long-term investors in equities remain largely unaffected, traders who rely on frequent entry and exit in the F&O segment will now pay more on every transaction.
Consider a basic options trade. If an option premium is ₹100 and the lot size is 50, the total contract value comes to ₹5,000. Earlier, at an STT rate of 0.10%, the tax paid on selling this option was ₹5. With the revised STT rate of 0.15%, the tax increases to ₹7.50.
The difference of ₹2.50 may seem negligible for a single trade. However, for an active trader executing around 300 trades a month, this translates into an additional ₹750 in monthly costs. Over a year, the impact becomes far more meaningful.
Short-term traders, especially scalpers and intraday options traders, depend on thin margins and high volumes. Their strategies aim to capture small price movements repeatedly. Higher transaction costs reduce net gains on winning trades and deepen losses on losing ones.
This is particularly relevant given recent data showing that 91% of individual investors in the equity F&O segment lost money in FY25, with total losses touching ₹1.06 lakh crore. In such an environment, even a modest rise in trading costs can further tilt the odds against retail participants.
The STT hike is not just about increasing tax collections. By raising costs for rapid-fire trading, the government is effectively discouraging excessive speculation without impacting long-term investing. Equity investors who buy and hold shares for longer periods remain largely unaffected by this change.
Read more: Adani Group Stocks Surge Up to 12% as India-US Trade Deal Lifts Market Mood.
While the STT increase may look minor on paper, its cumulative effect is significant for everyday traders. For retail participants, higher trading costs mean lower net returns and reduced room for error. As transaction expenses rise, traders may need to reassess their strategies, trade frequency, and risk management to stay profitable in a costlier trading environment.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.
Published on: Feb 3, 2026, 11:59 AM IST
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