Is the Rise in STT Hurting Revenue Collection? Insights from Zerodha’s Nithin Kamath
Synopsis
Nithin Kamath, co-founder of Zerodha, raises alarms over the persistent increase in STT, suggesting it may be detrimental to trading volumes. He highlights the recent significant hikes and the government's ambitious revenue targets, questioning their feasibility amidst these growing taxes.
Key Takeaways
Nithin Kamath expresses concerns over rising STT .
STT has increased with each Union Budget .
Recent Budget 2024 saw a 60% hike in F&O STT.
Higher STT could dampen trading volumes.
The government's projections for STT collections may not be met.
Mumbai, Jan 31 (NationPress) Nithin Kamath, co-founder of Zerodha, has expressed his worries regarding the continual rise in Securities Transaction Tax (STT). He believes that escalating taxes are progressively damaging trading activities in the market.
In a recent post on social media, Kamath elaborated that STT was initially implemented when the long-term capital gains (LTCG) tax was abolished.
Despite the reintroduction of LTCG, STT has consistently increased with each Union Budget.
As a participant in the market, he consistently hopes for a decrease in STT, but instead, it has been on a yearly upward trend.
“As a market participant, I always anticipate that the budget will lower STT, but it continues to rise. STT was established when LTCG was zero, yet now that LTCG has returned,” Kamath stated on the social media platform X.
He drew attention to the significant hike announced in Budget 2024, where STT on futures and options (F&O) trades surged by 60%.
The tax on futures increased from 0.0125% to 0.02%, while the levy on options grew from 0.0625% to 0.1%.
According to him, the immediate effects of this hike were not evident since the markets were experiencing a robust bull phase, maintaining high trading activity.
“The 60% increase in F&O STT from Budget 2024 (0.0125% to 0.02% on futures and 0.0625% to 0.1% on options) didn't substantially impact volumes initially, as the bull market persisted with increasing participation,” he noted.
“However, markets are not perpetually in a bull run; the repercussions became apparent in the past year,” he added.
As market dynamics cooled over the previous year, the elevated STT began to influence trading volumes.
He also referenced the government's projections for STT collections in the fiscal year 2025-26, estimated at ₹78,000 crore.
However, by January 11, collections were around ₹45,000 crore. Even if ₹12,000 crore is collected by the end of March, the total would be close to ₹57,000 crore, falling nearly 25% short of the target.
“I believe the government could have generated significantly more revenue without the 2024 hike,” Kamath remarked.
Point of View
It is imperative to acknowledge Nithin Kamath's concerns regarding the rising STT rates. Such increases could potentially hinder market activity, ultimately affecting investor sentiment. This situation warrants attention from regulators to ensure a balanced approach to taxation that fosters market growth while ensuring adequate revenue collection.
NationPress
11 May 2026
Frequently Asked Questions
What is Securities Transaction Tax (STT)?
Securities Transaction Tax (STT) is a tax levied on transactions made in securities, including stocks and derivatives, in the Indian financial markets.
How has STT changed recently?
Recently, STT on futures and options increased by 60% as announced in the Budget 2024, raising concerns among market participants regarding its impact on trading volumes.
What are the projected STT collections for 2025-26?
The government has projected STT collections to be ₹78,000 crore for the financial year 2025-26, although current collections are falling short of this target.
Why is the increase in STT concerning?
The increase in STT is concerning as it may deter trading activities, leading to a decline in market volumes and ultimately affecting overall revenue collection.
What did Nithin Kamath propose regarding STT?
Nithin Kamath has advocated for a reduction in STT, suggesting that the government could achieve higher revenue without the recent hikes.
