The Budget Made Options Trading More Expensive. Good.

Traders are angry about the higher tax on futures and options. After a year of reading SEBI’s loss data, I think the Budget got this one right.

What changed

The Union Budget on February 1 left income tax slabs alone and set the fiscal deficit at 4.3% of GDP. The line that caused the most noise on social media was smaller. The securities transaction tax on futures rose to 0.05% of the value traded, and on options to 0.15% of the premium. For a long-term investor buying shares, nothing changed. For someone trading options several times a day, the cost of each trade went up noticeably.

I wrote last year about my uncle’s options trades, and how he only ever shared the winners. Since then, SEBI’s data has been even clearer. Over 91% of individual traders in futures and options lost money in 2024-25, with combined losses of about ₹1.06 lakh crore. That is more than many state governments spend on education in a year.

Why a tax can protect people

Taxes usually exist to raise money. Some also exist to discourage things, like taxes on cigarettes. The higher STT on derivatives is partly the second kind. It makes very frequent trading more expensive, which slows down exactly the behaviour that loses the most money. Someone placing twenty option trades a day will feel it. Someone investing once a month will not.

Critics say this punishes skilled traders and pushes activity to other countries. There is some truth in that. Market makers, the firms that keep prices tight, also pay more, and spreads may widen slightly. But the government has to weigh that against crores of retail traders who are losing money they often cannot afford to lose.

The part I would add

A tax alone will not stop people who believe they are about to get rich. The apps that make trading feel like a game, the influencers selling courses and the screenshots of winning trades all push in the other direction. What would help more is honest information at the moment of decision, like a broker screen showing the share of its own customers who lost money last year before you place a trade.

The Budget had bigger items, including ₹12.2 lakh crore of capital spending on roads, railways and defence. But for students like me, the STT change says something about how the government sees markets. It wants Indians to invest, through SIPs and long-term shareholding, and it is becoming less willing to subsidise speculation that mostly transfers money from households to professionals.