Finance Bill: Centre hikes STT on futures and options trading by up to 25%

The Centre on Friday hiked the securities transaction tax (STT) on the sale of future and option contracts by up to 25 per cent. In the amendments to the Finance Bill, 2023, the STT has been hiked by 24 per cent on the sale of options and 25 per cent on the sale of futures contracts.

STT was introduced in 2004 and is levied on transactions involving different types of securities through the stock exchange route. All stock market transactions that involve equity or equity derivatives are liable under STT, including mutual fund transactions.

STT for intraday trades is charged at 0.025 per cent on the sell side. For delivery transactions, it is charged at 0.1 per cent on both the buy and sell sides.

How much has STT been hiked?

STT on the sale of options has been hiked from Rs 5,000 on a turnover of Rs 1 crore to Rs 6,200, indicating a hike of 24 per cent. For options, the STT is charged on the premium and not the strike price.

On the sale of futures contracts, the STT has been hiked to Rs 1,250 on Rs 1 crore of turnover against the earlier levy of Rs 1,000. This indicates an increase of 25 per cent.

The Finance bill was passed in Lok Sabha on Friday without discussion.

Will options traders see any other change from March 30?

The National Stock Exchange (NSE) has also chosen to withdraw the Do Not Exercise (DNE) facility for those trading in the options segment from March 30.

It allows the option traders an auto square off their positions. If a trader does not take the delivery, it will automatically get squared off. The residual amount will have to be paid by the trader.

It allows brokers to stop exercising option contracts for their clients. The DNE facility prevents the risks around the physical settlement.