Union Budget 2026: Hike in transaction tax to check F&O speculation, says finance minister

‘Need to keep fiscal deficit within a band so that economy grows at a steady speed’

The increase in the securities transaction tax (STT) announced in the Budget on Sunday is aimed at “discouraging” high-risk speculation by retail traders in the futures and options (F&O) market and will not affect other transactions, finance minister Nirmala Sitharaman has said.

“We get messages from people about the huge losses faced by those who don't have that much extra money. So, this nominal increase is purely aimed at deterring high speculation. Govt can’t see such huge losses being faced by people and not do anything about it,” the finance minister said at a press conference.




Her proposal to marginally raise the STT on some segments of futures and options spooked the market, with the bellwether BSE Sensex falling by 1.9% or 1,547 points.

Revenue secretary Arvind Shrivastava said the volume of transactions in futures and options indicated that a large part was in the realm of “heavy speculation”, which results in losses to small, retail and unsophisticated investors, and the new move was addressing that concern.

“It is meant to handle the systemic risks in the derivatives market. Even after this increase, the rates of STT will remain modest compared to the volume of transactions. The market regulator can respond better to the question of what else can be done to regulate the market,” he said.

A study by Sebi last July estimated the net losses incurred by retail traders in the F&O segment at Rs 1.05 trillion in FY25, with nearly 91% of the retail traders suffering losses during the year. Sebi has also taken steps to check speculation.

Responding to a question about the gradual approach adopted towards the fiscal deficit, Sitharaman said that drastic changes don’t go down well as one or the other section in the economy gets hurt. Govt has pegged the fiscal deficit target for 2026-27 at 4.3% of GDP against 4.4% in the current financial year.

“We will have to be gradual but keep it well within that band, which gives confidence and shows that we care for prudent fiscal management. It must be steady so that the economy moves at a steady speed. It's a responsible and realistic number,” the FM said.

Sitharaman announced India’s debt-to-GDP ratio is set to decline to 55.6% in FY27 from 56.1% this year. “In the new fiscal anchor, the glide path will continue, and the fiscal deficit will be the operational target to attain the debt-to-GDP ratio. So, we are not moving away from fiscal deficit — it’s not going to be the monitorable target. The target will be the debt-to-GDP ratio. But both do work in tandem,” economic affairs secretary Anuradha Thakur said.

The FM said the govt will go ahead with all disinvestment proposals cleared by the Cabinet. The Centre has pegged the FY27 disinvestment target at Rs 80,000 crore, 2.4 times of this year’s revised estimate of Rs 33,800 crore.

DIPAM (Department of Investment and Public Asset Management) secretary Arunish Chawla added that the Centre was following a composite strategy, and that disinvestment and closure need to be seen together.

“As part of that strategy, half of the 50 in-principle approvals obtained for both disinvestment and closure have been acted upon. The other ones are on track,” he added.

Asked about the restructuring of PFC and REC, Sitharaman said that the details of streamlining will be unveiled soon. She also said the high-level committee on banking will prepare the roadmap for 2047. “The terms of reference will be prepared; it will go into the expanse of the banking sector so that we can plan for banking by 2047,” she said.

Financial services secretary M Nagaraju added that there are a large number of aspects relating to the banking requirement that will be looked at, including the credit requirement and other aspects.