Budget 2026: STT hike a ‘shocker’, says ex-CBDT member Akhilesh Ranjan

Finance Minister Nirmala Sitharaman’s Union Budget 2026 largely stayed away from tinkering with personal income tax rates or long-term capital gains rules, but delivered an unexpected jolt to the markets through a sharp increase in STT on derivatives trading.

In a post-Budget conversation with CNBC-TV18, Akhilesh Ranjan, former Member of the Central Board of Direct Taxes (CBDT), described the STT hike as a “shocker”, questioning both its rationale and effectiveness.

STT Hike Raises Eyebrows

Ranjan said the decision to increase STT was surprising, particularly when the government had otherwise avoided major changes in capital taxation.

“The STT was a bit of a shocker… I think the STT is no longer a legitimate tax, so to increase it is very strange,” he told CNBC-TV18.

The government has reportedly justified the move as an attempt to curb excessive speculation in the futures and options segment. However, Ranjan expressed doubts over whether such a tax increase would actually deter speculative trading.

“I’m not so sure whether this sort of an increase in STT does anything to curb speculation amongst investors. It might just hit the margins of large players who are active in the futures and options market,” he said.

Market participants fear the higher transaction costs could impact liquidity and trading volumes in India’s booming derivatives market, which has seen significant retail participation in recent years.

Budget Pushes Tax Certainty, Litigation Reduction

While the STT hike grabbed headlines, Ranjan said several other measures announced in the Budget were “very, very welcome”, particularly those aimed at preventing prolonged tax disputes.

He highlighted reforms around safe harbour rules, transfer pricing, and the Advanced Pricing Agreement (APA) mechanism as key steps toward reducing litigation.

“You remember I was talking about preventing litigation from happening. And I think the measures that have been announced… are steps which are very, very welcome. I’m sure they will cut down on litigation to a large extent,” he said.

The safe harbour expansion is expected to provide greater clarity to IT services exporters and multinational firms, reducing uncertainty in cross-border taxation.

Decriminalisation of Tax Defaults: Building Trust

A major reform signal in Budget 2026 is the government’s move toward decriminalising several tax-related defaults.

Ranjan called it a “very good move” that strengthens trust between taxpayers and the administration.

“There are a host of measures which are building trust and confidence in the taxpayers… the provisions where the tax defaults are now not really criminal offences,” he noted.

Experts believe such measures could improve India’s tax compliance ecosystem by shifting the approach from punitive enforcement to cooperative administration.

Retrospective Amendments Seen as Clarificatory

The Budget also includes retrospective amendments in response to certain court rulings, particularly around procedural issues such as the Document Identification Number (DIN).

While retrospective changes often spark anxiety among taxpayers, Ranjan argued these should be viewed positively.

“These are attempts to try and resolve issues which are creating a lot of uncertainty… the law has been clarified and resolved,” he said.

He added that the intent appears to be reducing ambiguity rather than introducing fresh tax burdens.

Also Read | Market falls after Budget 2026: What spooked investors, what next

Market Fallout vs Reform Relief

Budget 2026’s tax package has therefore delivered a mixed message: a surprise market-linked levy increase on one hand, and significant administrative reforms aimed at improving ease of doing business on the other.

The STT hike may weigh on derivatives-heavy market activity in the near term, but measures such as safe harbour expansion, APA strengthening, and decriminalisation could help corporates and investors by reducing compliance friction and litigation risk over the longer run.