'Limited To Futures & Options': FM Sitharaman Sets The Record Straight On STT Hike In Budget | Exclusive

Finance Minister Nirmala Sitharaman on Monday strongly defended the government’s decision to raise Securities Transaction Tax (STT) on the derivatives segment, saying the move was aimed squarely at curbing excessive speculation and not at boosting revenues. In an exclusive interview with Network18 Group Editor-in-Chief Rahul Joshi, she made it clear that the increase was limited only to futures and options, and did not impact the cash market. “It is not for revenue considerations that we have done this. It is not on all STTs. We are only touching on futures and options. Cash is not even touched,” she said, pushing back against concerns that the move could hurt already weak markets amid uncertain global sentiment.

Sitharaman acknowledged that

opinions could differ on market valuations but said the government’s concern stemmed from the scale of losses suffered by retail participants in derivatives trading. “The speculative tendencies… and in fact, the Ministry of Finance has received several parents, elders who call us and say, ‘Are you going to sit and watch people lose money?’” she said, citing studies which showed that “90 per cent of people who have gone into futures and options have lost money.” According to her, the STT hike is meant to act as a deterrent where speculation is rife, while regulators such as SEBI will continue to address risks through margins, contract structures and other safeguards.

Responding to suggestions that speculation could have been tackled through alternative measures, Sitharaman said the government’s approach was carefully calibrated and limited in scope. “We have only tried bringing in a deterrent where speculation is rife. We are not touching the market. Other STTs have not been touched,” she emphasised, underlining that the intent was not to disrupt genuine investment activity but to address an unhealthy surge in high-risk trading behaviour.

On broader questions around capital gains taxation, the finance minister rejected the suggestion that rates had been quietly raised over the years, arguing instead that the changes were part of a rationalisation exercise. “It has gone up, or it is rationalised so that all asset classes can be treated equally,” she said, adding that the government had even introduced flexibility for taxpayers who felt disadvantaged. Sitharaman maintained that stability in tax incidence continues to guide policy, concluding that the current framework strikes a comfortable balance between fairness and predictability.

In her Budget speech on Sunday, FM Sitharaman raised the STT on derivatives (Futures & Options) trades — proposing to increase STT on futures trading to 0.05 per cent from 0.02 per cent, and STT on options premium and exercise to 0.15 per cent from earlier levels (0.1-0.125 per cent). This was intended to curb speculative high-frequency activity in the derivatives markets and rationalise trading costs, including a sharp rise in expenses for frequent traders and brokerage revenue streams.

Indian benchmark indices saw sharp declines post the announcement as investors sold off equities and derivatives-linked stocks, especially brokerages and exchange operators. The BSE Sensex plunged over 1,500 points on Budget day, wiping out significant market capitalisation, and the Nifty 50 also posted steep losses.