**Executive Summary**
This document is an answer provided by the Minister of State in the Ministry of Finance, Shri Pankaj Chaudhary, to Unstarred Question No. 383 raised in Lok Sabha. The question concerns a proposal for increasing the Securities Transaction Tax (STT) and related issues. The Finance Bill, 2026, to be laid before the Lok Sabha on February 1, 2026, will reflect the outcome of the examination of STT rates.
**Key Points / Main Content**
* **STT Rate Proposals:**
* Proposals involving STT rates are under examination as part of the annual budgetary exercise.
* The outcome of this examination will be reflected in the Finance Bill, 2026.
* **Derivative Trading Volume:**
* Data on index options transactions from a SEBI consultation paper (“Measures to strengthen index derivatives framework for increased Investor protection and Market stability”, published on July 30, 2024) is referenced.
* Individual investor transactions within index options grew from ₹2 to ₹41 for every ₹100 traded from FY 2018 to FY 2024.
* **Regulatory Concerns:**
* SEBI has expressed concerns regarding the speculative nature of trading, particularly on expiry days.
* SEBI believes bursts of speculative hyperactivity in derivative markets can endanger investor protection and market stability.
* SEBI’s concerns were not in the context of a change in tax policy.
**Impact Analysis**
**Stakeholder: Government**
* **Impact:** The government is responsible for examining and potentially implementing changes to STT rates.
* **Action Required:** Examination of STT rates is underway and will be presented in the Finance Bill, 2026, to be laid before the Lok Sabha on February 1, 2026.
**Stakeholder: Investors (Retail and Institutional)**
* **Impact:** Investors may be affected by potential changes in STT rates on Futures and Options contracts, which could impact trading strategies.
* **Action Required:** Investors should monitor the Finance Bill, 2026, for any changes to STT rates and assess the potential impact on their investment strategies.
**Stakeholder: SEBI**
* **Impact:** SEBI's concerns regarding speculative trading activity are acknowledged. The consultation paper from SEBI is referenced in the response.
* **Action Required:** No immediate action required. SEBI will need to continuously monitor the impact of the STT policy on market stability.
Key Entities Referenced
Securities Transaction Tax (STT): A tax on transactions in securities, the increase of which is the subject of the parliamentary question.
Lok Sabha: The lower house of the Indian Parliament, where the question regarding STT is being raised and answered.
Ministry of Finance: The ministry responsible for matters related to finance in the Indian government, answering the question.
SEBI: The Securities and Exchange Board of India; regulator that has expressed concerns about the speculative nature of trading.
Finance Bill, 2026: Bill to be presented to the Lok Sabha reflecting any potential changes to STT rates.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
LOK SABHA
UNSTARRED QUESTION NO. 383
TO BE ANSWERED ON MONDAY, FEBRUARY 2, 2026/MAGHA 13, 1947 (SAKA)
PROPOSAL FOR INCREASING SECURITIES TRANSACTION TAX (STT)
383. SHRI EATALA RAJENDER
Will the Minister of FINANCE be pleased to state:
(a) whether the Government is taking steps for deepening the tax base and increasing
Securities Transaction Tax (STT) on Futures and Options contracts to 0.2 per cent and 0.1 per
cent respectively, if so, the details of the steps taken and results achieved so far in this regard;
(b) whether the decision to raise taxes comes amid a dramatic rise in derivative trading
volumes, which have increased significantly since 2020, if so, the details thereof;
(c) whether retail investor participation in derivatives market surged from 2 per cent in 2018 to
41 per cent in 2023, if so, the details thereof; and
(d) whether regulators have expressed concerns that this surge in trading is leading to
speculative behaviour that may be detrimental to individual investors and the broader economy
and this change in tax policy is likely to encourage retail investors to shift focus from speculative
trading to long-term investments and if so, the details thereof and the current status thereof?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) It is stated that proposals involving rates of STT are examined as part of the annual
budgetary exercise. The outcome, if any, shall be reflected in the Finance Bill, 2026, to be laid
before the Lok Sabha on 1st February, 2026.
(b) In light of (a), not applicable.
(c) The figures referenced above represent the data from the SEBI consultation paper on
‘Measures to strengthen index derivatives framework for increased Investor protection and
Market stability’ published on July 30, 2024. The said data indicates that the share of individual
investor transactions within index options grew from just ₹2 for every ₹100 traded in the
financial year 2018 to ₹41 for every ₹100 traded in the financial year 2024.
(d) Yes, SEBI has expressed concerns that surge in trading on expiry day is mostly
speculative in nature wherein it was noted that bursts of speculative hyperactivity in derivative
markets, particularly by individual players, can detract from sustained capital formation by
endangering both investor protection and market stability. However, these concerns were not in
context of change in tax policy.
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