New Delhi: Next month, those doing Futures and Options (F&O) trading are going to get a shock. Actually, Union Finance Minister Nirmala Sitharaman had announced to increase the Securities Transaction Tax (STT) on F&O trading in Budget 2024. Now it is going to be implemented from October 1.

What is STT?

The tax levied on buying or selling any securities is Securities Transaction Tax (STT). This includes futures and options along with equity shares. Stock exchanges collect this tax at the time of every transaction and deposit it with the government.

Why is the government increasing STT

Market regulator SEBI and the government want to keep retail investors away from the derivatives market. SEBI's study also revealed that 9 out of 10 investors doing F&O trading lose their money. The government also considers it as speculation. This is the reason why STT is being increased, so that it can be made difficult for retail investors.

How much is the charge going to increase

From October 1, STT on sale of options will be increased from 0.0625 percent of the premium to 0.1 percent. This means that if you sell an option with a premium of Rs 100, then the STT will now be Rs 0.10 instead of Rs 0.0625. At the same time, STT on sale of futures will now increase from 0.0125 percent of the trading price to 0.02 percent. That is, if you sell a future contract worth Rs 1 lakh, then STT will now be Rs 20 instead of Rs 12.50.

What will be the impact on traders

The people most affected by this change will be those who trade a lot or speculate on small margins. Actually, due to the increase in STT, every transaction will now become more expensive than before. Due to this, people may refrain from doing it repeatedly. This change can have a greater impact especially in the options segment, where the premium is already very high.

Big institutions will also be affected, but they can easily bear the increase due to their deep pockets and long-term trading strategies. However, their cost of trading will also increase.