---
title: "India's Tax Hike on Stock Derivatives Threatens Arbitrage Funds"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/274902121.md"
description: "India's government has increased the tax rate on stock derivatives, impacting arbitrage fund managers who are now facing reduced returns. This unexpected tax hike, aimed at curbing speculative trading, threatens the $36 billion arbitrage fund industry. The higher costs associated with executing spot-futures arbitrage strategies could significantly diminish investor returns, as noted by Aditya Agarwal from Wealthy.in, given that arbitrage spreads are typically narrow at 0.6%–0.8% monthly."
datetime: "2026-02-05T02:20:14.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/274902121.md)
  - [en](https://longbridge.com/en/news/274902121.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/274902121.md)
---

> Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/274902121.md) | [繁體中文](https://longbridge.com/zh-HK/news/274902121.md)


# India's Tax Hike on Stock Derivatives Threatens Arbitrage Funds

India's arbitrage fund managers are bracing for reduced returns following the government's unexpected decision to increase the tax rate on stock derivatives. According to Jin10, this move poses a threat to the rapidly growing $36 billion industry. Announced in parliament on Sunday, the tax hike aims to curb high-risk speculative trading in the options market. However, arbitrage funds, considered lower risk and popular in volatile markets, will also be affected as the tax rate change raises the cost of executing spot-futures arbitrage strategies, potentially diminishing investor returns. Aditya Agarwal, co-founder of wealth management platform Wealthy.in, noted that arbitrage spreads are typically narrow, often only 0.6%–0.8% monthly, and higher transaction costs per trade will significantly erode these spreads.

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