Zerodha CEO Nithin Kamath Slams STT Hike, Highlights US Market Speculation
In a sharp reaction to the government's decision to significantly increase the Securities Transaction Tax (STT) on futures and options (F&O) trading, Zerodha co-founder and CEO Nithin Kamath has voiced strong criticism, drawing comparisons to what he describes as the "pure speculative mania" of US markets. Kamath's remarks, made in a post on X (formerly Twitter), come directly after Finance Minister Nirmala Sitharaman announced the tax hike during her Union Budget 2026 speech.
Details of the STT Increase Announced in Budget 2026
On February 1, Finance Minister Sitharaman revealed a substantial rise in STT rates, specifically targeting derivatives trading. The levy on futures transactions has been raised by a massive 150%, moving from 0.02% to 0.05%. Simultaneously, the STT on options transactions has seen a 50% increase, climbing from 0.01% to 0.15%. This move is part of the government's broader strategy to curb excessive speculative activity in the derivatives segment, where reports indicate that nearly 90% of retail investors incur losses.
Nithin Kamath's Critique of US Market Speculation
Kamath elaborated on his stance by explaining why he views US markets as highly speculative. He pointed out that in the US, options exist for nearly every conceivable asset, crypto trading operates continuously around the clock, and platforms like Kalshi and Polymarket allow individuals to place bets on sports, weather patterns, and even political events. "In a sense, every aspect of American life has been gamified and turned into something you can bet on," he added, emphasizing the contrast with Indian markets.
Prior to the Budget presentation, Kamath had already expressed concerns about STT, noting that as a market participant, he had long hoped for a reduction in the levy. Instead, the government has continued to increase it, adding to the overall tax burden on investors.
Controversy and Historical Context of STT in India
The STT was originally introduced in India on October 1, 2004, under the Finance Act, 2004. Its implementation aimed to replace the long-term capital gains (LTCG) tax, simplify tax collections, and reduce evasion in equity and derivatives transactions. However, LTCG on listed equities was reintroduced in the Union Budget 2018, while STT was not rolled back, leading to criticism from market commentators and experts who argue that investors now face a dual tax burden.
Several analysts have echoed Kamath's view, stating that STT was initially justified when LTCG was zero, but with its reinstatement, the tax load has become excessive. This perspective has gained traction among industry stakeholders, including the National Stock Exchange (NSE), which expressed hope a day earlier that the government would reconsider the STT hike on index and single-stock futures starting from the next fiscal year, as outlined in the Budget for FY27.
Government Defense and Market Implications
The government has defended its decision to raise STT on F&O trading, citing the need to deter speculative behavior that often leads to significant losses for retail investors. This policy shift reflects ongoing efforts to stabilize the derivatives market and promote more sustainable investment practices. As debates continue, Kamath's comments underscore a broader discussion about taxation, market regulation, and the global nature of financial speculation.
