Zerodha DP charges are collected by Central Depository Services Limited (CDSL) as the shares that Investors buy are parked in CDSL and it acts as a warehouse for shares.
What does it mean to be a Depository Participant (DP)?
Depository Participant (DP) charges are imposed by CDSL(depository) anytime you sell shares from your DEMAT account. It’s comparable to how exchanges and brokers charge transaction fees and commissions.
DP For equities sold from your holdings, the Depository (CDSL) and the Depository Participant (Zerodha Broking Ltd) charge Rs. 13.5 (+ 18 percent GST) each day per scrip (stock). On the day you place your sell order, the stock will be moved out of your DEMAT account.
if you sell 50 shares of X in the morning and 50 shares of X in the afternoon, the total relevant DP costs for the day for that scrip (stock) will be Rs. 13.5 + 18 percent GST.
Because multiple scrips are being sold, the total relevant DP costs for the day will be Rs 13.5 + Rs 13.5 = Rs 27 + 18 per cent GST if you sell 50 shares of X in the morning and 50 shares of Y in the afternoon.
Zerodha DP charges are entered straight into the ledger and do not appear on the contract note. It is charged once per scrip on a single day, regardless of the number of scrips sold. For additional details, read this article.
The DP charges of Rs 5.5+GST for mutual fund redemptions have been abolished as of May 3, 2019. More information can be found here.
Because the shares are credited to your Demat account and later debited, DP charges will apply to BTST transactions, just as they would to standard delivery transactions.
If you’re interested to open your DEMAT Account with Zerodha, here is the Direct Account opening link
Why are “Buy Today Sell Tomorrow” (BTST) trades subject to DP charges?
BTST transactions were not subject to a DP charge until June 2, 2021. However, due to a change in the settlement process, DP charges are now applicable. Here’s a quick letter to explain what’s changed in the settlement process and why DP costs are now in effect.
For BTST transactions, the old settlement mechanism was used.
For example, suppose you buy 100 shares of Reliance Industries on Monday and sell them on Tuesday, completing a BTST transaction. The following process was carried out in the background:
- Shares purchased on Monday (T day) would be sent to the broker’s pool account by the clearing organisation on T+2 day, i.e. Wednesday.
- Rather than crediting the shares to your Demat and then debiting it again for the sale transaction’s settlement, the shares would be sent directly from the broker’s pool account to the clearing corporation via Early Payin (EPI).
- The settlement is now complete.
- Because the shares did not hit the client’s demat account throughout this process, there was no credit or debit of shares, and hence no DP charge.
- Despite its simplicity, the above procedure had few operational concerns. The broker would receive the dividends if the BTST deal was carried out around the ex date of a corporate action.
- The broker would be credited with bonus/split shares.
- Because the shares were in the broker’s pool account on the day of the corporate action, the broker was declared the owner. The broker then had to reconcile all of the transactions and provide the client the requisite credits.
- This increased the broker’s operational costs and caused a great deal of misunderstanding among clients. As a result, we’ve switched to a new settlement procedure.
A new settlement process has begun.
- Changes to the settlement process were implemented by the clearing corporation and depositories around May 2021. Instead of moving stocks from the client’s Demat to the broker’s pool and then to the clearing company, clearing members can now earmark securities to be given to the clearing corporation via EPI of securities from the client’s Demat account.
- We’ve altered the way BTST trades are settled with the new EPI process to avoid complications with corporate actions.
- To illustrate how it works, let’s use the same example –
- On Monday, 100 shares of Reliance are purchased, and on Tuesday, they are sold in a BTST transaction.
- After we receive it from the Clearing Corporation, shares purchased on Monday (T day) will be credited to your Demat account on T+2 day, i.e. Wednesday.
- The shares will be allocated for delivery for the sale transaction conducted on Tuesday on the same day that they hit your demat account, i.e. T+2.
- You won’t be able to see earmarked shares on Kite or Console.
- On Thursday, the targeted shares are debited, and the settlement is complete.
The benefit of this approach is that if you do a BTST transaction during a corporate activity —
- There is no need for the broker to reconcile your dividends because they will be credited to your bank account.
- Your Demat account will be credited with bonus and splits.
- Instead of being passed on from the Broker’s PAN, any TDS on dividends will be filed by the dividend issuing company against your PAN and reflected in your tax credit statement (Form 26AS).
However, because the shares now arrive at your Demat and are debited the next day, the BTST deal is subject to Zerodha DP charges of Rs.13.5 + 18% GST.