Discussion: Government Plans Measures to Curb Retail Participation in F&O

The government is considering measures to deter retail investors from the F&O segment. Proposed steps include reclassifying F&O income from ‘business income’ to ‘speculative income’ and introducing TDS. TDS would help the government track investors and may deter participation. Tax experts also suggest a potential 30% tax on F&O income (similar to cryptocurrencies). Currently, F&O income is taxed as business income, which can be offset against other business losses. Reclassifying it as speculative income would limit offsets to F&O gains only.

Seems like the government and regulators are concerned about increased retail participation in derivatives, fearing significant losses. Do share your views on this. IMO there would be steps to use stock derivatives only to hedge underlying, thereby reducing the market participation (just like currency, maybe).


Anything that needs to be done to exercise greater control over the lives of people will be done.

This is in sync with the trend of everything heading towards monopoly and reducing freedoms in all aspects of our lives.

The Government wants to control everything just like China does and in greater magnitude, under their “Look East” policy.

The derivative trading volume globally is 10x to 50x, wherein 8x of cash volumes is in the US. In India, derivatives to cash volumes is just under 5.5x and there is no need for such punitive measures.

However, the trend shows that the personal taxes are going up and the corporate taxes are heading down and even lower for the “selective corporate groups”.

Expect personal taxes to go up and personal freedoms to go down for another 5 years.

Speculation is as old as the world. Expect significant shift towards dabba trading again just like in 2000s.


IMO bad move if this comes.

Govt - will lose out on revenue (STT, GST)

Retail - Those who want to gamble and give away hard earned money will figure out some other way to do so.

Besides active trader population (those who trade everyday) is very low relative to the population and even number of active demat accounts. If govt is ok with lottery, liquor and cigarettes it shouldn’t worry too much about FnO retail participation. Trust the market to filter out the able traders from the not so able ones.


This is the best move. College students are getting addicted to trading, FDs are being broken, people are gambling in the name of trading, household budgets are getting shattered, families getting destroyed. A reset in trading is needed. I think a perfect move to curb rise in trading activities. Brokers would be unhappy due to volume slump but this should be a nice move for the greater good.

Ye chadarmod government hai.


Totally against this , why does the government want to dictate by saying it is saving retail investors. It’s free society


“India is not a nanny state” (42 min onwards). Hope this view of the regulator prevails.

Some privileged entities can collocate their servers in exchange and get tick by tick data (price, complete market depth) faster than retail and then run strategies using them faster than retail. But if ithe ordinary guy on the street is the one to be regulated that for me is a joke.

Any field of life success rate is no better than success in trading. Why isolate and burden the retail more with more taxes and hurdles ?


Very valid points. Seems our politicians’ stupidity has no bounds.

We still have dabba trading wherein margin requirement is almost negligible. So, definitely business will shift there.

Moreover, why this fuss about 95% of traders lose money or blah blah blah! Tell me any business/profession this ratio is greater than this! Does everyone going to Mumbai for becoming actor becomes successful! NO. But there is no stopping there because there costs are not visible. People lose family fortune there too. Same goes for becoming a cricketer.

Thus, all this stupidity is just to exercise greater control.

And, if they are so much concerned, why not ban stock markets for trading? Go back to physical settlement. Only delivery allow karo bas!


The same government brought regressive laws against the farmers a few years back. However the farmer community stood up for its rights & massive protests were held forcing the government to roll back these laws. We certainly can’t expect the same unity among trader community. The traders are already overburdened with brokerage & all sort of upfront taxes (GST,STT,exchange turnover,stamp duty), the proposed tax of 30 percent would prove to be the last straw breaking the camel’s back. Not everyone can afford to go to Dubai to enjoy tax haven facilities. Giving up Fno trading is an easier option for retailers and that’s what the government precisely wants


@Sarita77 Well, have you seen the movie The Dictator? If not please watch it and that’s where we are exactly now. Anyways, a prominent minister already said, don’t go into all those data and facts.

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Stupid move, if it gets implemented options volume will dry up and majority of people will move to forex and crypto.
Stupid government idea.

But how is TDS supposed to work ? What if you make a profit one day, and lose the same profit the next hour or the next day ? The government would have to issue TDS refunds worth crores of rupees every year, since 89% of the traders are making loss in the market.

In the current scenario what they are proposing is you cannot offset your f and o with other business right ? Suppose my scenario is if I am having two different account in zerodha and Upstox one account is making profit in Upstox and loss zerodha both are FAnd O then have to pay the net tax at the financial year end