STT hike on F&O October 2024
Effective 1 October 2024, the Securities Transaction Tax (STT) rates applicable to F&O contracts in India were increased as part of a broader policy package aimed at reducing speculative retail F&O participation. The new rates applied to all NSE and BSE F&O segments.
The new rates
The STT changes (1 October 2024):
| Contract type | Pre-October 2024 | Post-October 2024 |
|---|---|---|
| Futures sell | 0.0125% | 0.02% |
| Options sell (premium) | 0.0625% | 0.1% |
| Options exercise / ITM expiry | 0.125% on settlement | 0.125% (unchanged) |
(Exact rates as announced by SEBI / CBDT; verify against the STT Act 2004 for definitive numbers.)
For an option seller, the STT on premium received went from 6.25 basis points to 10 basis points, a 60% increase. For futures sellers, the STT went up by approximately 60% as well.
Why STT was increased
The hike served multiple purposes:
1. Reduce speculative activity
A higher STT makes high-frequency F&O speculation more expensive. The hurdle to break even rises; traders need bigger price moves or higher win rates.
2. Revenue generation
STT is a direct tax that goes to the government. The increase produces additional revenue from a segment that was growing rapidly.
3. Disincentivise option selling
Option selling (premium collection) is a particularly retail-attractive strategy that often generates losses on tail events. The higher STT on option premium specifically targets this.
4. Complement F&O entry barriers
The STT hike works alongside the F&O entry barrier rules , the weekly expiry contraction , and the lot size revision as a coordinated policy push.
Impact calculation
For a typical F&O trader’s monthly turnover:
| Metric | Value |
|---|---|
| Monthly F&O turnover (sell side) | Rs 50 crore |
| STT pre-October at 0.0625% | Rs 3,12,500 |
| STT post-October at 0.1% | Rs 5,00,000 |
| Additional STT per month | Rs 1,87,500 |
| Additional STT per year | Rs 22,50,000 |
For a high-frequency trader, the year-on-year impact is meaningful. For a retail trader trading at much lower turnover, the absolute increase is smaller but the percentage burden is similar.
Effect on Zerodha brokerage
Zerodha’s brokerage on F&O is Rs 20 per order (flat). The STT is charged separately by the government (collected by the broker on behalf of the government). Zerodha does not benefit from the STT hike; it passes through to the client.
The total per-trade charges (Zerodha brokerage + exchange + STT + GST + stamp + SEBI) increased post-October 2024 for F&O sell legs.
Impact on retail F&O P&L
Per SEBI’s retail F&O loss study , the average annual loss per loss-making trader was approximately Rs 1.2 lakh. The STT hike adds to this:
- A small intraday-only trader with Rs 1 crore annual F&O turnover sees ~Rs 5,000 additional STT.
- A higher-volume trader (Rs 10 crore annual turnover) sees ~Rs 50,000 additional STT.
For an already-loss-making trader, this widens the deficit.
Tax treatment of STT
STT paid on F&O is treated as a transaction cost and deductible from F&O P&L for tax purposes (when F&O is classified as business income).
For complex tax situations involving F&O classification (business income vs capital gains), consult a Chartered Accountant before filing.
Industry response
Brokers (including Zerodha ):
- Updated charge calculators to reflect new rates.
- Notified clients of the increase pre-implementation.
- No internal margin impact (STT is government-collected).
Trade associations:
- Argued that the hike was too steep.
- Pushed for graduated implementation.
- Accepted the broader policy direction.
Did the hike work?
Early indicators (Q4 2024 to Q1 2025):
- F&O turnover declined 15-25% post-October 2024.
- Active F&O account count declined.
- Retail concentration in weekly options reduced.
Whether this reduction was driven specifically by the STT or by the combined policy package (STT + weekly expiry contraction + entry barriers + lot size revisions) is hard to disentangle.
See also
- SEBI 90% retail F&O traders lose money study
- SEBI F&O entry barrier rules 2024
- Weekly expiry contraction November 2024
- Lot size revision F&O 2024
- SEBI true-to-label charges October 2024
- SEBI broker risk disclosure norms
- SEBI peak margin rules explained
- Upfront margin requirements post-2020
- 50:50 cash collateral rule explained
- Direct payout to demat SEBI rule
- Margin trading SEBI new rules 2026
- SPAN and exposure margin on Kite
- Margin required on order window
- Margin available / used / cash on Kite funds
- Option premium credit on Kite funds
- Kite Positions tab explained
- Kite Holdings tab explained
- Realised vs unrealised profit calculation
- Positions P&L vs funds gains differences
- Securities Transaction Tax
- STT and STCG tax (India)
- Speculative business income (India)
- Income tax return
- Capital gains tax (India)
- Futures and options
- How to add F&O contracts to the marketwatch
- How to add Nifty / BankNifty options to the marketwatch
- Brokerage calculator (Zerodha)
- SEBI
- Zerodha
External references
- SEBI STT circular October 2024
- CBDT STT framework
- Zerodha brokerage calculator
- Securities Transaction Tax Act 2004
References
- Securities Transaction Tax Act, 2004, as amended.
- Finance (No. 2) Act, 2024, amendments to STT rates effective 1 October 2024.
- SEBI, F&O STT framework update, sebi.gov.in.
- Zerodha brokerage calculator update post October 2024, zerodha.com.