Securities Transaction Taxes have received much attention over the last few years with countries and global organizations trying to control the level of speculations, especially since the Global Financial Crisis. This study examines the impact of an increase in the level of securities transaction tax on traded quantity of shares and time series behaviour of stock returns using data from two prominent national stock exchanges of India. We find that when the tax on equity transactions increases from 0.1% to 0.125%, the quantity of traded shares (volume) decreases by more than 25%. Since the volatility of returns on stocks is not constant through time, conditional heteroscedasticity models are used to estimate the volatility of stock returns. The impact of tax on volatility of return on indices is insignificant.