Prominent broker Zerodha’s Nitin Kamath has unleashed a pointed takedown of Securities Transaction Tax (STT) hikes, demonstrating their role in curbing market trades and starving government treasuries. Via X, he unpacked the mechanics and metrics proving this self-defeating strategy.
Historically, STT filled the LTCG tax void, yet escalated despite its revival. Each budget disappoints with rises, not the hoped-for reductions. The 2024 budget’s 60% F&O spike—futures to 0.02% (from 0.0125%), options to 0.1% (from 0.0625%)—temporarily evaded scrutiny amid market highs.
As euphoria faded over the ensuing year, volumes cratered, spotlighting STT’s drag. Fiscal impacts are now crystal clear.
For FY25-26, ₹78,000 crore STT target seems fanciful. January 11 figures: ₹45,000 crore. Optimistic finale might hit ₹57,000 crore, a 25% miss.
‘Revenue would soar without the 2024 hike,’ Kamath contends. This revelation challenges orthodox tax elevation tactics, spotlighting the need for nuanced policies that nurture trading ecosystems. Kamath’s intervention could sway upcoming fiscal dialogues toward sustainability over short-term grabs.