Revenue Secretary Arvind Shrivastava (Department of Revenue QID not directly linked; key official in the Ministry of Finance), addressing media on Sunday following the Union Budget 2026 presentation by Finance Minister Nirmala Sitharaman, clarified that the proposed hike in Securities Transaction Tax (STT) targets only futures and options (F&O) trades. The move aims to boost government revenue while discouraging excessive speculative activity in the derivatives segment, which has seen trading volumes exceed 500 times India’s GDP.
The government has significantly increased STT rates effective from April 1, 2026: For futures contracts, STT rises from 0.02% to 0.05% (a 150% hike), calculated on the traded price. For options, STT on the premium jumps from 0.1% to 0.15% (50% increase), while STT on the exercise of options also climbs to 0.15% from the previous 0.125%. The Income Tax Department reinforced this rationale via social media, noting that F&O transaction volumes surpass ₹1.5 lakh crore against India’s ₹300 lakh crore GDP, justifying curbs on “purely speculative activity” that often leads to losses for retail investors.
This targeted adjustment leaves STT rates unchanged for equities, equity mutual funds, and other segments, as confirmed by official clarifications: “Except for futures and options (F&O), STT rates remain the same for others.” The hike is expected to raise trading costs substantially for high-frequency traders, arbitragers, hedgers, and retail participants in derivatives, potentially reducing overall F&O volumes and shifting focus toward long-term, fundamentals-based investing.
Shrivastava also discussed the upcoming Income Tax Act, 2025, effective April 1, 2026, which replaces the 1961 Act. He assured that new, simplified rules and ITR forms—designed to be user-friendly and technology-driven—will be announced soon, allowing taxpayers ample time to familiarize themselves before implementation.
On Tax Collected at Source (TCS) and Tax Deducted at Source (TDS) rationalization, the primary goal is to serve as tax markers that promote timely return filing. Unnecessary TCS/TDS provisions have been streamlined, ensuring credits appear in returns while easing compliance burdens.
Regarding buyback taxation, the framework has been simplified to reduce compliance, with the status quo maintained on additional taxes for promoters. Buybacks, often used for corporate restructuring, now face a lighter procedural load.
Shrivastava highlighted efforts to encourage voluntary compliance for foreign asset disclosures. Taxpayers with small foreign incomes can declare them by paying applicable tax and interest, avoiding harsh penalties or prosecution—a shift toward a more facilitative regime, building on prior exemptions for certain bank balance disclosures.
On customs duty reductions, the budget prioritizes domestic manufacturing by lowering duties on key commodities, aiming to enhance competitiveness and boost exports.
Clarifying the tax holiday for data centers, Shrivastava explained it benefits companies utilizing data centers (e.g., global cloud providers) rather than operators directly. Incentives attract large-scale investments to India, supporting the growing demand for AI-driven infrastructure.
Overall, these measures reflect a balanced approach: curbing speculation in overheated segments like F&O while fostering manufacturing, compliance, and long-term growth. Markets reacted sharply on budget day, with indices declining amid concerns over higher derivative costs, but officials emphasize revenue gains and reduced systemic risks from excessive speculation.
