In a stark critique, Zerodha co-founder Nitin Kamath has lambasted the relentless upward trajectory of Securities Transaction Tax (STT), arguing it is eroding trading enthusiasm and sabotaging government earnings. His recent X thread lays bare the data-driven fallout from these policy missteps.
STT entered the scene when LTCG tax was zeroed out, but its persistence—and hikes—continued unabated even after LTCG’s return. Kamath, a frontline market player, expressed perennial budget optimism for cuts, only to face hikes. Budget 2024’s 60% F&O STT escalation—from 0.0125% to 0.02% on futures and 0.0625% to 0.1% on options—proved pivotal.
Bullish sentiment post-hike sustained volumes temporarily. However, the past year’s market lull revealed the truth: sharply reduced trading. This has cascaded into fiscal woes.
India’s FY25-26 STT goal of ₹78,000 crore is unraveling. Collections lagged at ₹45,000 crore by January 11, with projections capping out at ₹57,000 crore even under rosy scenarios—27% below target.
Kamath’s punchline: Forgoing the 2024 increase would have netted superior collections. His post ignites discussions on tax dynamics in vibrant markets, warning that over-taxation stifles liquidity and participation. With retail traders at the epicenter, policymakers face mounting pressure to pivot toward growth-friendly reforms.