Budget 2026 STT Hike Explained: What It Means for Your F&O Trades

If you trade Futures and Options, your “cost per trade” just went up, and it went up in a way that hurts frequent traders more than occasional traders.

The Union Budget 2026 proposal increases Securities Transaction Tax (STT) on equity derivatives. The change is scheduled to apply from 1 April 2026.

Before we get into examples, one quick reminder: STT is charged on turnover, not on profit. Even if a trade loses money, STT still applies.

Want the bigger picture? Read Finnovate’s full Union Budget 2026–27 highlights.

What changed in STT rates

Here is the snapshot view, inserted upfront because it sets the base for every calculation:

So yes, equity delivery and intraday are unchanged, and the hit is concentrated on derivatives.

How STT is actually charged in F&O

This part matters because many traders assume STT behaves like brokerage. It does not.

1) Futures
STT is charged on the sell side, as a percentage of the traded value.

2) Options sold (short options)
STT is charged on the premium value when you sell the option.

3) Options exercised on expiry
If an option is exercised, STT is charged on the intrinsic value when the option finishes in-the-money.

That last one is the classic “expiry surprise” for people who hold ITM long options till settlement.

Example 1: Nifty Futures STT impact (Nifty 25,000, lot 65)

We use Nifty at 25,000 for illustration. We use Nifty lot size = 65 as per the NSE revision.

Contract value = 25,000 × 65 = ₹16,25,000

Trade: You sell 1 lot of Nifty Futures (exit or initiate a short)

• Old STT (0.02%) = 16,25,000 × 0.0002 = ₹325
• New STT (0.05%) = 16,25,000 × 0.0005 = ₹812.50

Extra STT per 1-lot sell = ₹812.50 − ₹325 = ₹487.50

Now scale it to trading style:

• If you do 10 such sell-side futures transactions a day, extra STT is about ₹4,875/day
• If you do that 20 trading days a month, extra STT is about ₹97,500/month

This is why the reaction was sharp. Even a “0.03% jump” feels small, but on a high-turnover segment, it adds up fast.

Example 2: Options selling STT impact (premium-based)

Let’s take a simple premium example.

Trade: You sell 1 lot of Nifty option at a premium of ₹150
Premium turnover = 150 × 65 = ₹9,750

• Old STT (0.10%) = 9,750 × 0.001 = ₹9.75
• New STT (0.15%) = 9,750 × 0.0015 = ₹14.63 (₹14.625 rounded)

Extra STT per 1-lot option sell = ~₹4.88

This looks small, and for a low-frequency trader it is small.
But if your strategy is high churn, like frequent weekly selling and frequent adjustments, then STT becomes a steady leak because it hits every sell.

Example 3: Option exercise STT impact (expiry-based)

Now the part that confuses many traders: exercise STT is on intrinsic value, not premium.

Assume you bought a Nifty 24,800 Call and on expiry Nifty ends at 25,000.

Intrinsic value per unit = 25,000 − 24,800 = ₹200
Intrinsic turnover = 200 × 65 = ₹13,000

• Old STT (0.125%) = 13,000 × 0.00125 = ₹16.25
• New STT (0.15%) = 13,000 × 0.0015 = ₹19.50

Extra STT on exercise = ₹3.25 per lot

Again, small on one lot, but it matters if you frequently let ITM options go to settlement across multiple lots.

Who feels this hike the most

1) High-frequency and high-churn traders

If your edge is slim and you rely on volume, STT eats into the edge because it is charged regardless of profit.

2) Weekly options traders

Weekly options are popular because premiums look small, but many strategies need frequent rolls, adjustments, and re-entries. More churn means more STT.

3) Anyone trading bigger size

Lot size is designed so contract value stays in a band, and for Nifty it is currently 65.
So your base is already large, and any rate hike multiplies quickly.

What you should do differently now

1. Update your breakeven math
   Add the higher STT into your per-trade cost assumptions. If your strategy survives only because costs were underestimated, it will show up now.
2. Reduce unnecessary churn
   If you do 6 adjustments where 2 would do, this hike makes that difference visible.
3. Be careful with letting long ITM options go to settlement
   Know when exercise STT applies and how it is computed.
4. Track costs trade-by-trade, not month-end
   In F&O, costs are the silent compounding effect, and STT is one of the biggest line items because you cannot opt out of it.

FAQs

1. From when does the higher STT apply?

From 1 April 2026, as per the Budget 2026 proposal and Finance Bill provisions reported by major outlets.

2. Is STT increased for equity delivery or intraday?

No. The change is focused on derivatives, while delivery and intraday STT is unchanged.

Disclaimer: This article is for information and education only. It does not constitute investment or trading advice. Derivatives trading involves risk, including the risk of loss.