Trading in the stock market has now become easier with online platforms popping up allowing on-the-go trading. And, this convenience comes with a number of charges such as brokerage, taxes, and stamp duty among others. However, you should know the basics before understanding the break down of what charges are levied and what each of these means. Here is a look at how brokerage charges in India work:
Intraday trading means you can buy or sell the shares on the same day. For example, you buy a share in the morning and sell it before the market closes on the same day.
Intraday delivery means you buy a share and keep it at least for a day. For example, you buy a share today and sell it any day like tomorrow or a day after that, a week later or even a year later.
Brokerage Charges in India as per various brokers
On a major front, there are two types of brokers categorized on the type of brokerage plans they offer.
A traditional broker type, full-service brokers offer a comprehensive set of services such as commodities, stocks, and currency with research, advisory, asset, sales management, and investment banking in a single account. In general, they charge a brokerage percentage, ranging from 0.01% to 0.50% on delivery and intraday trades.
These are brokers that offer high-speed and state-of-the-art platforms for trading in currency and commodities derivatives as well as stocks. They do not provide investment advice because they charge a reduced commission. On delivery and intraday trading, a discount broker charges a flat, fixed fee of say, Rs 10 or 20 per trade.
Irrespective of the type of trade, you have to pay brokerage while selling or buying a share. However, there are a few brokers who levy brokerage at one side of a transaction only, either on selling or buying.
Let’s take an example to understand the structure of brokerage charges in India better. Here are charges levied by a broker to the traders registered with it.
- There is a charge of 0.05% of total turnover on intraday trading while 0.30% of total turnover on delivery trading
- In intraday trading, if you buy 1000 shares worth of Rs. 100 then brokerage charged is 0.5% i.e. Rs 500. On the other hand, in delivery trading, if you buy 1000 shares of Rs. 100 then the brokerage charged is 0.3% i.e. Rs. 300
This, however, is not possible if the overall transaction value is very small i.e, if you buy 10 shares worth Rs.10 each then the total transaction value becomes Rs.100 and ideally, you should be charged 100*0.3%= 0.3 but since the value is too small most brokers will charge you a flat fee of Rs 10-20. This flat-fee brokerage model is being followed across the entire broking industry since the inception of discount brokers.
- In intraday trading, the total brokerage charged for both buy and sell trades is 2*500= Rs. 1000. While in delivery trading, the total brokerage charged is 2*300= Rs. 600
While brokerage charges are decreasing as the competition among different brokers is increasing, there are additional taxes and charges that you need to pay on share trading. Stamp duty, Securities transaction tax, Exchange transaction charges, Service tax, Depository participant, SEBI turnover charges, and Capital gains tax are other charges.
Securities Transaction Tax (STT)
After brokerage, STT is the second biggest charge levied on trades
For Delivery Trading
It is charged on both buying and selling transactions. On each side, around 0.1% of the total transaction amount is charged as STT.
For Intraday Trading
It is charged when you sell a stock. A charge of around 0.025% of the total transaction is levied as STT for sale transactions of intraday trading.
|Segment||STT on Share Trading|
|Equity Delivery||0.1% on both Buy and Sell|
|Equity Intraday||0.025% on the Sell Side|
|Equity Future||0.01% on Sell Side|
|Equity Options||0.017% on Sell Side(on Premium)|
|Currency Futures||No STT|
|Currency Options||No STT|
|Commodity||0.01% on Sell Side (Non-Agri)|
Service tax or GST is the same for both delivery and intraday tradings and is equal to 15% of the brokerage charge that you pay.
|Equity Delivery, Intraday, F&O||18% on Brokerage + Transaction Charge|
|Currency F&O||18% on Brokerage + Transaction Charge|
|Commodity||18% on Brokerage + Transaction Charge|
Stamp duty is charged by the state government and varies with the state. For example, stamp duty for Maharashtra is 0.02% on intraday and 0.01% on delivery trading. This is charged on the total turnover and also charged during both sell and buy transactions.
Exchange Transaction Charges
These are charged by the stock exchanges. They are charged on both transaction types and are the same for both delivery and intraday trading types. If you have an account with a discount stock broker, it is going to be the largest part of the cost of trading. It is a sum of two charges such as clearing charges and exchange turnover charges.
Commodity Transaction Tax
It is a tax imposed on the exchange/trade of commodity derivatives. There are taxes on non-farm or non-agro commodities such as gold and silver, non-ferrous metals like copper, natural gas, and energy products such as crude oil. Agricultural commodities are exempted from this tax.
SEBI Turnover Charges
SEBI stands for the Securities Exchange Board of India and it is a regulator of the securities market. The board makes rules and regulations for the exchanges and levies a charge for all purchase and sale transactions in securities except debt securities. The turnover charge is the same for both intraday and delivery trade types and is 0.0002% of the total amount.
|Segment||SEBI Turnover Fee Rate|
|Equity Delivery, Intraday, F&O||0.0001% (₹10 per Crore)|
|Currency F&O||0.0001% (₹10 per Crore)|
|Commodity||0.0001% (₹10 per Crore)|
Depository Participant Charges
National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are the stock depositories in India. An electronic form of the stock is deposited in a depository when you buy a share. The depository charges a fixed amount for this service, which is charged to the depository participant and not the investors directly, where the broker and Demat service providers are the depository participants. DPs act as a linkage between the investor and depository as investors cannot approach it directly. For delivery trading, a flat fee is charged between Rs 10 to 35 depending upon the broker.
Capital Gains Tax
For a trader, it is one of the most important considerations. Short term and long term are the two types of taxes levied on gains from trading. Short term tax is charged when you sell a stock before completing 1 year of buying, which is charged at a flat 15% of the profit, irrespective of the tax slab. However, for an intraday trader, tax is charged as per the applicable tax slab. Long term, on the other hand, refers to the tax levied on gains when you sell a stock after 1 year of buying. There’s no long-term capital gains tax in India. So big investors, investing in the long-term should try for maximum profit.
What is Contract Note?
Contract note, a document sent by the broker to the client at the end of the trading day to provide detail about the transaction with the broker.
This document includes detail of buy & sell transactions for the day, brokerage charged, other fees or charges applied and total amount due to customer.
Here is a sample contract note from ICICI Securities:
This is a complete bifurcation of different charges levied on share trading in addition to brokerage including SEBI turnover charges, Securities transaction tax, Depository participant charge, and Stamp duty. While almost all others are fixed, a comparison of brokerage charges can help you find the most economical broker.