Intraday Traders Beware: Tax Hike To Eat Into Your Profits From April 1

Come April 1, trades in the derivatives segment will become more expensive.

As announced in the Union Budget on February 1, the Securities Transaction Tax (STT) will kick in for futures and options (F&O) trades at higher rates. Recently, broker platform Zerodha has also raised brokerage on select F&O trades. For active traders, the combined effect is a clear jump in transaction costs, regardless of whether a trade makes money or not.

What is STT?

STT is a tax charged on the value of securities traded on exchanges. Importantly, it is charged on turnover, not on profit.

What is F&O?

Futures and Options are derivative contracts where traders bet on price movements, often with small margins and high volumes. Profitability here depends on thin spreads and frequent trades.

What Changes From April 1

Why This Change Matters

An industry expert, points to the sharp jump in rates and what it means in practice: “The STT hike effective April 1 will further increase transaction costs for traders. STT on futures has risen from 0.02 per cent to 0.05 per cent (2.5 times), and on options from 0.10 per cent to 0.15 per cent. This means on Rs 1 crore transaction, cost rises from Rs 2,000 to Rs 5,000 in futures.”

Another industry expert, underlines that the increase is clearly aimed at derivatives, with futures seeing the steeper rise: “The latest STT hike effective April 1, 2026 is clearly targeted at the derivatives segment… STT on futures sees a steep 150 per cent jump, while options premium moves from 0.10 per cent to 0.15 cent.”

Another industry expert adds that this follows the Budget’s clear move to raise costs specifically in F&O: “After the Union Budget 2026, the STT in the derivatives segment-especially Futures & Options (F&O)-has increased sharply.”

‘Intra-Day & High-Frequency Traders Feel The Heat’

As STT is charged on turnover, not profit, frequent traders feel the impact first. He explains the core issue: “Since STT is charged on trade value (not profit), traders pay even on losses-making profitability harder, especially for frequent, low-margin trades.”

He says this directly hits short-term strategies: “This leads to a significant increase in trading costs, reducing overall profitability for traders… for short-term traders, especially Intraday Traders & Futures Traders, it will be difficult to remain profitable because the STT on futures has increased drastically.”

Another industry expert adds that day traders and F&O traders run on thin margins and high volumes: “Day traders and short-term investors will be the most impacted… For futures and options traders, the impact will likely be even larger because they operate on thin margins and rely on a high volume of trades.”

He points to the compounding effect on high-turnover desks: “Since STT is levied on turnover rather than profits, it disproportionately impacts high-frequency and active trading strategies, where costs compound with every trade regardless of profitability.”

‘A Policy Push Towards Fewer Trades, Higher Conviction’

Another industry expert believes the intent is to curb excessive churn: “Increasing the cost to trade will hopefully bring an end to the reckless and excessive trading and will lead to more prudent trading… the trading focus will be shifted towards the quality of trades executed, versus the overall market turnover.”

He calls it a behavioural nudge rather than a revenue move: “Traders will now need to recalibrate their approach-shifting toward strategies that involve fewer trades while focusing on capturing larger, high-conviction market moves.”

He says traders may become more selective: “The increase in STT will likely cause traders to be more conservative… and put more emphasis on trading situations that are well planned and where they have a high level of conviction.”

Another industry expert sees this reshaping trading behaviour beyond derivatives: “Overall, the STT hike will prompt investors to be more calculated in their approach… Going forward, one can expect investors to diversify their strategies, explore alternative investment avenues, and adapt to a landscape where efficiency and long-term perspective play a larger role.”

Source from: https://www.ndtv.com/india-news/intraday-traders-profits-stt-hike-from-april-1-will-costlier-f-o-trades-change-market-behaviour-11273567