New Delhi

Credit rating agency ICRA has projected a 16 per cent increase in Securities Transaction Tax (STT) collections in FY2027 following the Union Budget 2026 proposal to hike STT on futures and options (F&O) trades.

According to ICRA, the projection assumes that trading volumes will remain largely stable despite higher transaction costs. However, it cautioned that a moderation in derivatives activity remains a risk and could result in lower trading turnover, affecting brokerage volumes and revenues in the derivatives segment.

“The proposed increase in STT on F&O trades, following a similar hike in October 2024, reflects the continued policy intent to curb excessive speculative activity,” the agency said.

ICRA noted that strong growth in derivatives participation and a 60 per cent STT hike in the second half of FY2025 had earlier led to expectations of STT collections rising to Rs 780 billion in FY2026 from Rs 522 billion in FY2025. However, regulatory measures to rein in hyperactive trading dampened volumes, prompting an 18 per cent downward revision in FY2026 STT collections from the budgeted estimate.

As announced in Budget 2026, the STT rate on the sale of options in securities has been increased from 0.1 per cent to 0.15 per cent, while the rate on exercised options has been raised from 0.125 per cent to 0.15 per cent. The STT on the sale of futures has been increased from 0.02 per cent to 0.05 per cent. The revised rates will come into effect from April 1, 2026.

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In a clarification, the Income Tax Department said derivatives trading volumes exceed 500 times India’s GDP, justifying higher STT rates to curb speculative activity.