'Tax hike on F&O, capital gains may cool down the activity in the markets', says Nithin Kamath

India's second largest stockbroking app Zerodha co-founder Nithin Kamath, in a recent post on X (formerly Twitter), said the tax hikes on futures and options (F&O) trading and capital gains might "cool down the activity in the markets."

"STT on options goes up from 0.062% to 0.1%. STT on futures goes up from 0.0125% to 0.02% from October 1st. We collected about Rs 1500 crores of STT last year, @zerodhaonline .If the volumes don't drop, this will increase to about Rs 2500 crores at the new rates," he said.

"If the idea was to cool down the activity in the markets, this might just do the trick," he added.

Budget summary for us

STT on options goes up from 0.062% to 0.1%. STT on futures goes up from 0.0125% to 0.02% from October 1st.

We collected about Rs 1500 crores of STT last year, @zerodhaonline. If the volumes don't drop, this will increase to about Rs 2500 crores at the new…

— Nithin Kamath (@Nithin0dha) July 23, 2024

During the Union Budget 2024 announcement, Union Finance Minister Nirmala Sitharaman said that short-term capital gains (STCG) on some assets will be hiked from the current 15% to 20%.

"Short-term gains on certain financial assets shall henceforth attract a tax rate of 20 per cent, while that on all other financial assets and all non-financial assets shall continue to attract the applicable tax rate," FM said.

Additionally, the long-term capital gains (LTCG) tax has been hiked from the current 10% to 12.5%. Notably, the exemption limit for long-term capital gains tax has been increased to Rs 1.25 lakh from Rs 1 lakh.

Sitharaman also announced that listed financial assets held for more than a year will be classified as long-term. 

The budget proposed increasing the Securities Transaction Tax (STT) rate on the sale of an option in securities from 0.0625% to 0.1% of the option premium and on the sale of futures in securities from 0.0125% to 0.02% of the price at which such futures are traded.