India enacts Income-tax Act, 2025 and raises STT on F&O trades
Change
India enacted the Income-tax Act, 2025, effective April 1, 2026, and raised securities transaction tax on equity derivatives to 0.05% for futures and 0.15% for options premiums and exercise.
Why it matters
Derivative trading now carries higher compulsory transaction costs, forcing trading desks and brokers to treat execution and margin calculations as costlier and less attractive for speculative strategies. Corporate tax and compliance teams must transition to a single "tax year" framework and align reporting and payment schedules with the new Act's processes.
Implications
- • Proprietary trading desks and portfolio managers at asset managers must recalculate trade economics and adjust execution or risk limits to incorporate the higher STT rates — failing to do so will compress net returns on derivatives strategies.
- • Brokerage firms and exchange clearing members' compliance teams must update billing, client disclosures and margining systems to reflect the new STT rates — not updating systems will cause inaccurate client charges and reconciliation breaks.
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