Over the years, the degree of awareness around investing shows an upward graph, with more and more people trying their luck in the stock market, backed by a variety of strategies, professional help, and constant look-outs on price movements. In fact, this has been more pronounced (quadrupled!) over the last couple of months.
There has been a huge influx of new, first-time investors who have entered the market, lured either via IPOs, or stock investing. In March 2019, India had 3.6 crore Demat accounts. By November 2021, this figure doubled to over 7.7 crore Demat accounts with an average of 20 lakh accounts being opened every month.
India is witnessing a boom in the retail investing space, and with the propagation of mobile technology to smaller towns, the stock market fever is seen gripping even tier-2 and tier-3 cities. People are becoming keen on putting their money in the market and watching it grow. However, nothing is ever free-of-cost. In the context of investing in the stock market, this cost comes in the form of some charges and fees that go along with your investing transactions.
Although these charges are very minimal, one must be aware of all the expenses they have to bear. In this blog, we explore what these charges are, how they are calculated and what the difference is between these charges for various methods of investing.
Types of Brokers
Before we get started, let’s understand one crucial factor that affects the charges that shall be levied. Different types of brokers, whom you may approach for investing or trading in the market, work on different fee structures.
There are two primary types of brokers who operate in the Indian market:
1- Full-service brokers:
They are traditional brokers who provide end-to-end brokering services to their customers. Apart from the quintessential buying and selling of securities, these brokers also offer services like investment planning, retirement planning and financial advice, portfolio management, etc. When investors sign up with a full-service broker, an experienced broker is assigned to them who helps them make investment decisions. However, these brokers charge a hefty commission from their clients.
2- Discount brokers:
Delivery trading is one of the most commonly used trading methods in the market. It involves buying a security and holding onto it for at least the next trading day. In this case, the securities can be sold after one day, a couple of days, months, or even years. This is a more systematic way of investing for the long term to generate and maximise your wealth.
Stock Investing Charges for Delivery & Intraday Trading
Before diving deep into understanding the array of charges, let us understand what is meant by turnover. Turnover is the sum of all the transactions that have taken place. For example, let’s assume that 100 stocks were bought at Rs 500 each. These were sold the next month at Rs 550 each. Therefore, the total turnover becomes:
(100 x 500) + (100 x 550) = Rs 1,05,000.
Let us now understand the different charges that you will have to pay in the case of both intraday and delivery trades.
1- Brokerage
Brokerage is the fees levied by the brokerage house for the services they render. It helps cover the broker’s expenses and pays for the salaries of employees at the brokerage house. Discount brokers generally charge a lower brokerage compared to full-service brokers. Additionally, each broker has its own fixed brokerage, which varies for different brokers
Value of brokerage for different kinds of trades are as follows:
For delivery trades: Zero brokerage (for most brokers).
For intraday trades: Rs 20 per executed order or 0.25% of each executed order (whichever is lower). For example, let’s assume you buy 10 shares of HDFC Bank, each at Rs 1,400. Therefore, 0.25% of the total transaction is:
Rs 14,000 x 0.25% = Rs 35
Since this is higher than Rs 20, the brokerage levied on this order will be Rs 20.
For futures & options: Rs 20 per executed order or 0.25% of each executed order (whichever is lower). For example, let’s assume you buy a futures lot of 50 shares of RIL, each at Rs 2,500. Therefore, 0.25% of the total transaction is:
Rs 1,25,000 x 0.25% = Rs 312.5
Since this is higher than Rs 20, the brokerage levied on this order will be Rs 20.
It is important to be aware of these charges because while it may feel like a minuscule percentage, it may become a significant amount when it adds up or when you effect large transactions, eating into your overall returns (as cost of investment). It is also crucial for you to get help from trusted and authorised brokers only so to avoid falling prey to frauds and being overcharged. Read our blog to become more careful about broker misconduct.
2- STT
STT or Security Transaction Tax is a direct tax, mandatorily collected by the broker from the customer who buys or sells securities in the market. It is levied as follows:
Delivery trades: STT of 0.1% is levied for both buy and sell orders. For example, let’s assume you buy 5 shares of Asian Paints, each at Rs 3,000. Therefore, the STT will be:
Rs 15,000 x 0.1% = Rs 15.
In an alternate scenario, if you sell the same, you will have to pay Rs 15 as STT.
Intraday trades: An STT of 0.025% is levied only on sell orders; no STT is levied on buy orders. For example, if you sell 1 share of Havells at Rs 1,300, the STT will be:
Rs 1,300 x 0.025% = Rs 0.325
Futures and Options: An STT of 0.01% is levied only on the sell orders; no STT is levied on buy orders. For example, let’s assume you sell 1 futures lot of 50 shares of RIL, each at Rs 2,500. Therefore, STT will be:
Rs 1,25,000 x 0.01% = Rs 12.5
For options sell trades, an STT of 0.05% is levied only on the premium value.
Read our blog to get more detail on what the Security Transaction Tax is.
3- GST
For availing of the services of a brokerage firm, depository participant, and SEBI, you will also have to pay GST at18%. This is a standard charge that is the same for delivery, intraday, and F&O trades. The 18% GST charge is also the same for all brokers in India.
4- Transaction charges
Also called turnover charges, it is levied by the exchanges in India (NSE, BSE).
Delivery & Intraday trades: A charge of 0.00335% is levied on the turnover of both buy and sell transactions on NSE. For BSE, the transaction charge is 0.00345% of the turnover for both buy and sell transactions.
Futures and options: A charge of 0.00195% of the turnover is levied on futures transactions while a charge of 0.053% of the turnover is levied on the options transactions.
5- DP charges
This is the charge levied by depositories (NSDL and CDSL) for storing the securities bought by you. The broker firms are the depository participants that act like a link between you (investor) and the depositories. So, the depositories levy a charge to the depository participant, who then levies it on the investors. This is done in the following manner:
Delivery trades: A DP charge of Rs 20 + GST is levied on each scrip, regardless of the volume of the stocks.
Intraday trades: No DP chargesFutures and option : No DP charges
6- SEBI charges
The Securities and Exchange Board of India or SEBI levies a charge of Rs 10 for each Rs 1 crore of turnover. This charge is the same for all types of trades and brokers in India.
7- Stamp duty charges
The Government of India levies the stamp charges under the Indian Stamp Act of 1899. This is levied on all types of securities that are traded on different exchanges in the country and is fixed for all brokers. It is important to remember that stamp duty charges are levied only on the buy-side of the trades. It is levied as follows:
Delivery trades: Stamp duty will be 0.015% of the turnover. For example, if 100 shares, each worth Rs 500 are bought, the stamp duty will be:
Rs 50,000 x 0.015% = Rs 7.5
Intraday trades: Stamp duty will be 0.003% of the turnover. For example, if 100 shares, each worth Rs 500 are bought, the stamp duty will be:
Rs 50,000 x 0.003% = Rs 1.5
Futures: Stamp duty will be 0.002% of the turnover. For example, if 100 shares, each worth Rs 500 are bought, the stamp duty will be:
Rs 50,000 x 0.002% = Rs 1
Options: Stamp duty will be 0.003% of the turnover. For example, if 100 shares, each worth Rs 500 are bought, the stamp duty will be:
Rs 50,000 x 0.003% = Rs 1.5
8- Miscellaneous Charges
Apart from the above mentioned charges, there are some other charges that an investor is liable to pay. For example, Angel One (Erstwhile Angel Broking) involves a monthly maintenance charge of Rs 20+ GST but has no Demat account opening charges.
The takeaway
There are multiple stakeholders that function behind the scenes to ensure that trading in the stock market goes on seamlessly. This, however, comes with multiple costs, albeit minimal. Therefore, an aware investor must know about all these charges before they start their investment journey.
Experts at TejiMandi help you ensure a smooth investment process. We give active advice on portfolio management so you can navigate your way through the stock market better!
