'I wish we had no STT but...': Nithin Kamath says tax distorts markets, inflates options volumes
Kamath proposed lowering STT on cash and futures, and easing leverage limits for intraday stock trades.
- Aug 7, 2025,
- Updated Aug 7, 2025 3:13 PM IST
Zerodha co-founder Nithin Kamath has called out India’s Securities Transaction Tax (STT) as a major reason for the country’s ballooning options trading volumes and says the tax now outweighs brokerage fees collected by his firm.
In a LinkedIn post, Kamath argued that STT has become the “biggest tax that traders pay,” significantly influencing where and how they trade. “At Zerodha, the STT we collect and pass on to the government is higher than the brokerage we earn,” he said.
Kamath traced a pivotal shift in the market to 2008, when STT on options changed from being based on contract value to being charged on premium — a move that made options cheaper to trade and, in his words, “impossible for anyone to trade options” prior.
The resulting volume surge in options, Kamath revealed, helped inspire the founding of Zerodha.
“We bet that people would trade more options,” he said. “It did play out the way we had thought it would.”
Since then, multiple changes to STT — especially its higher cost on cash equity and futures — have tilted the playing field further toward options. Kamath also pointed to other regulatory shifts, like weekly expiries and tightened intraday leverage, as additional factors driving India’s options explosion.
Still, Kamath stopped short of advocating for scrapping the tax entirely. Instead, he proposed lowering STT on cash and futures, and easing leverage limits for intraday stock trades. “It is a much better strategy to increase cash/futures volumes than to reduce trading volumes in options,” he said.
His remarks come amid growing scrutiny over India’s derivatives-heavy markets, where options trading now dominates turnover — raising red flags among regulators over systemic risk.
Zerodha co-founder Nithin Kamath has called out India’s Securities Transaction Tax (STT) as a major reason for the country’s ballooning options trading volumes and says the tax now outweighs brokerage fees collected by his firm.
In a LinkedIn post, Kamath argued that STT has become the “biggest tax that traders pay,” significantly influencing where and how they trade. “At Zerodha, the STT we collect and pass on to the government is higher than the brokerage we earn,” he said.
Kamath traced a pivotal shift in the market to 2008, when STT on options changed from being based on contract value to being charged on premium — a move that made options cheaper to trade and, in his words, “impossible for anyone to trade options” prior.
The resulting volume surge in options, Kamath revealed, helped inspire the founding of Zerodha.
“We bet that people would trade more options,” he said. “It did play out the way we had thought it would.”
Since then, multiple changes to STT — especially its higher cost on cash equity and futures — have tilted the playing field further toward options. Kamath also pointed to other regulatory shifts, like weekly expiries and tightened intraday leverage, as additional factors driving India’s options explosion.
Still, Kamath stopped short of advocating for scrapping the tax entirely. Instead, he proposed lowering STT on cash and futures, and easing leverage limits for intraday stock trades. “It is a much better strategy to increase cash/futures volumes than to reduce trading volumes in options,” he said.
His remarks come amid growing scrutiny over India’s derivatives-heavy markets, where options trading now dominates turnover — raising red flags among regulators over systemic risk.