New Delhi [India], February 1 (ANI): As the Union Finance Minister Nirmala Sitharaman on Sunday proposed a significant hike in Securities Transaction Tax (STT) on futures and options trades, the Income Tax Department issued a clarification on the hike in Securities Transaction Tax (STT) on futures and options trades and said, 'Except futures and options (F&O), STT rates remain same for others.'

It said the total volume of transaction in options and futures is more than 500 times of Indian Gross Domestic Product (GDP) and there was a justification to curb speculation.

'In Rupee terms, our GDP is 300 lakh crore rupees, while the volume for options and futures is more than 1.5 lakh lakh crore rupees. Therefore, there is justification for increase in rates to curb purely speculative activity in options and futures,' the Income Tax Department said in a post on social media platform X.

Attaching FAQs on the issue, the department said, 'The rate of STT on the sale of an option in securities has been increased from 0.1 per cent to 0.15 per cent, the sale of an option in securities where the option is exercised has been increased from 0.125 per cent to 0.15 per cent while the rate of STT on the sale of a future in securities has been increased from 0.02 per cent to 0.05 per cent.'

The revised rates shall take effect from the 1st day of April, 2026 and shall apply to derivatives transactions in securities entered into on or after that date, it said.

Notably, the current rates applicable to options in securities are 0.1 per cent of the option premium on sale of an option and 0.125 per cent of the intrinsic price on sale of an option when exercised. The current rate applicable to futures in securities is 0.02 per cent of the traded price on sale of a future.

Securities Transaction Tax is a small levy charged by the government on every buy or sell transaction in the stock market, including shares, futures and options. While it may appear modest, STT directly increases the cost of trading, particularly for frequent traders, hedgers and arbitrageurs. (ANI)