India Plans to Significantly Increase Derivatives Tax Rate, High-Frequency Trading Profit Model Faces Reshaping

格隆汇2026/02/02 07:47

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Glonghui, February 2｜As the government proposes to raise the equity derivatives tax rate to curb speculation in the world’s most active options market, high-frequency traders in India are preparing for reduced profits. To discourage risky trades that divert household savings from productive investments, the equity futures trading tax will be increased from 0.02% to 0.05%. The tax rates on option premiums and option exercises will be raised by 50% and 20%, respectively. Industry experts say that since taxes account for about a quarter of high-frequency trading costs, this will significantly raise the profitability threshold for such strategies and may weaken India’s competitiveness for foreign funds that rely on derivatives. Devansh Gupta, founder of the New Delhi-based trading firm AlgoQuant Fintech, said: “The increase in costs makes it almost unfeasible to run liquidity-providing strategies in India. The tax changes and other restrictions send a negative signal to global firms, and many have already paused their expansion plans in India.”

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