Budget 2026: 'Govt is going after speculation' - CIO says increasing STT and still having LTCG is unfair

Union Budget 2026 | The government's Budget 2026 moves signal a clear push to rein in speculation in financial markets, but the approach risks hurting long-term investors, according to Gurmeet Chadha, Managing Partner and Chief Investment Officer at CompleteCircle.

Reacting to the Budget, Chadha said: "Govt clearly is going after speculation. online gaming (Dream 11,Rummy, Pokerbazi) banned. F&O curbing thru higher STT. But at the same time we need to incentivise long term investing.. increasing STT & still having LTCG is unfair. Markets r disappointed & bad timing too."

Finance Minister Nirmala Sitharaman has proposed, in Budget 2026, a hike in the Securities Transaction Tax (STT) for derivatives trading - a move the government says is aimed at discouraging high-risk speculative activity in the futures and options segment.

Sitharaman proposed raising STT on futures contracts to 0.05% from 0.02%. STT on options premium and exercise of options are proposed to be increased to 0.15% from the present rate of 0.1% and 0.125%, respectively.

At the post-budget press conference on Sunday, the finance minister said the intention behind the STT hike is to curb speculative participation, particularly among small investors who were incurring heavy losses.

"This nominal increase is purely aimed at speculation, only to deter them, to discourage them. We are not against it (F&O trade), but small investors are facing losses, so how can we be quiet, so it (STT hike on F&O) is to deter such investments," Sitharaman said.

She added that the government is not looking to stop derivatives trading altogether, but wants to discourage retail participation in a segment where losses are widespread.

According to studies by market regulator Sebi, over 90% of retail investors' trades in the F&O segment lead to losses. Sebi has also cautioned small and retail investors against derivatives trading, citing the need for responsible investing, and has taken measures in the past to reduce volumes in the segment.

Revenue Secretary Arvind Shrivastava said the STT hike is aimed at managing wider risks in the market. "The government's intention is to discourage speculative tendencies, and the increase in rate is essentially in that direction. So, it is meant to essentially handle the systemic risk in derivative markets," he said.

Shrivastava added that even after the hike, the STT rates remain modest compared to the volume of trades in the derivatives market. The increase is expected to raise transaction costs for high-volume and short-term derivative strategies more than it does for cash equity investors.

In the previous Budget, Sitharaman had increased the long-term capital gains tax (LTCG) from 10% to 12.5%, a move that many investors and market participants hoped would be revisited in the current Budget. Sitharaman did not announce any changes to LTCG rates this year.