Futures and options trading is set to become more expensive after proposals announced in the Union Budget 2026, as the government looks to curb speculative activity in the derivatives market.
In the Budget, the government proposed an increase in the Securities Transaction Tax on several derivatives products. The Securities Transaction Tax on options premium has been raised from 0.1% to 0.15%. At the same time, the tax on futures has been increased to 0.05%. In the commodities segment, the Securities Transaction Tax on commodity futures has been proposed to be raised to 0.05% from the earlier 0.02%.
These changes mean higher transaction costs for traders who actively buy and sell futures and options. Market participants say the move is aimed at reducing excessive short-term and high-frequency trading, which has grown sharply in recent years, especially among retail investors.
Commenting on the proposal, Rajarshi Dasgupta, Executive Director – Tax at AQUILAW, said the higher tax shows the government’s intent to moderate speculative behaviour in the derivatives market.
He said, “The decision to raise Securities Transaction Tax on options premium from 0.1% to 0.15%, along with increasing STT on futures to 0.05%, signals the government’s intent to moderate excessive speculative activity in the derivatives market. While the impact on long-term investors is minimal, higher transaction costs could reduce high-frequency and short-term trading volumes. The challenge will be to strike a balance between curbing speculative excesses and ensuring that market liquidity and price discovery are not adversely affected. The Government will need to take timely efforts to minimise the impact on market liquidity and price discovery which is expected to come in due time.”
Experts believe that long-term investors who use derivatives mainly for hedging may not see a major impact. However, traders who depend on frequent trades and thin margins may feel the pinch, as even small increases in tax add up over a large number of trades.
The announcement on derivatives taxation came alongside several other key proposals in the Union Budget 2026. The Finance Minister proposed a capital expenditure outlay of Rs 12.2 lakh crore for the financial year 2026-27, signalling a continued focus on infrastructure spending.
Presenting the Budget, Finance Minister Nirmala Sitharaman said public capital expenditure has risen sharply over the years. She said it increased from Rs 2 lakh crore in 2014-15 to Rs 11.2 lakh crore in the Budget Estimates for 2025-26. For 2026-27, she proposed raising it further to Rs 12.2 lakh crore to maintain the momentum.
To support infrastructure development, the Finance Minister also announced plans to set up an infrastructure risk guarantee fund. This fund will provide a prudentially calibrated public credit guarantee to lenders, aimed at boosting confidence among private developers during the construction phase of projects.
She also spoke about speeding up asset monetisation by recycling real estate assets of central public sector enterprises through dedicated routes. In addition, proposals were made to promote environmentally sustainable cargo movement, including plans related to new dedicated freight corridors.
Speaking on the broader economic outlook, the Finance Minister said India is operating in a challenging global environment, where trade systems are under pressure and supply chains face disruptions. She said new technologies are changing production systems and increasing demand for resources such as water, energy and critical minerals.
She added that India will continue to take confident steps towards Viksit Bharat while balancing ambition with inclusion. According to her, as India’s economy grows and its trade and capital needs expand, the country must remain closely linked with global markets, export more and attract stable long-term investment.
While the broader focus of the Budget remains on growth and infrastructure, the proposed hike in Securities Transaction Tax clearly signals a tighter approach towards speculative trading in futures and options. For traders, this means higher costs and possibly lower returns, while for the market, the coming months will show whether the move helps cool excessive speculation without hurting liquidity.
