Derivatives trades get costlier as FM hikes transaction tax; MAT cut and credit relief offer limited comfort to corporates
The Union Budget 2026 made derivatives trading more expensive, with Finance Minister Nirmala Sitharaman announcing a sharp hike in Securities Transaction Tax (STT) on futures and options, even as the government moved to tighten tax treatment on share buybacks and offered selective relief to corporates through a lower Minimum Alternate Tax (MAT).
In her budget speech, the finance minister proposed increasing STT on futures contracts to 0.05 per cent from 0.02 per cent, a more than two-fold rise that is expected to hit high-volume and short-term traders the hardest. STT on options premium trading was also raised to 0.15 per cent from 0.10 per cent, signalling the government’s intent to curb excessive speculative activity in the derivatives segment and bolster tax revenues.
The budget also flagged a significant change in the taxation of share buybacks. Sitharaman said the government is mulling taxing buybacks as capital gains in the hands of all shareholders, a departure from the current framework. In addition, promoters may be required to pay an additional tax on buybacks, a move aimed at closing loopholes that allow tax-efficient cash distribution.
On the corporate tax front, the finance minister announced a final reduction in the MAT rate to 14 per cent from 15 per cent. She also allowed brought-forward MAT credit up to March 30 to be set off, providing relief to companies that have accumulated credits over the years.
In trade-related measures, the budget proposed withdrawing customs duty exemptions on select items made in India, reinforcing the government’s push for domestic manufacturing. At the same time, the duty-free import limit for seafood processing inputs was raised to 3 per cent of value to support exporters in the sector.
End of Article
