Union Budget 2026-27 STT Hike on F&O Trading 

Mumbai, February 1, 2026: Finance Minister Nirmala Sitharaman introduced some major changes in Securities Transaction Tax (STT) on Futures and Options (F&O) trading in the Indian stock markets. 

Under the 2019 Union Budget, the Securities Transaction Tax (STT) on futures contracts remains constant, whereas the STT on options has been modified, and the STT on option premiums will rise to 0.15% from 0.10%, while the STT on option exercise will rise to 0.15% from 0.125%. 

Impact on Investors and Market Activity 

A little rise in transaction costs as a result of the Securities Transaction Tax (STT) increase might discourage short-term speculative trading. It is anticipated that traders and investors will change their approach, giving long-term equity investments precedence over regular derivatives trading. 

Lower volumes in the futures and options markets are expected to be the immediate result and this is according to analysts, and the usage of derivatives for hedging may result in higher operating costs for asset management firms like 360 One, ICICI Prudential AMC, and HDFC AMC. 

Government Raises STT to Encourage Long-Term Investments 

In order to simplify market taxes, curb excessive speculation, and preserve long-term revenue, the Union Budget 2026–2027 raised the Securities Transaction Tax (STT) and the goal of the action is to promote fundamentals-based investing decisions as opposed to short-term trading. 

Investors and traders may choose to emphasise long-term equity holdings above regular derivatives trading as a result of the shift, which could slightly increase transaction costs and according to analysts, the change may lead to lower volumes in the futures and options market while eventually creating a more stable investment climate.  

Disclaimer: At HDFC SKY, we take utmost care and due diligence in curating and presenting news and market-related content. However, inadvertent errors or omissions may occasionally occur.  

If you have any concerns, questions, or wish to point out any discrepancies in our content, please feel free to write to us at content@hdfcsec.com.  

Please note that the information shared is intended solely for informational purposes and does not make any investment recommendations