Different Charges on Share Trading

Different Charges on Share Trading Explained- Brokerage, STT & More

Different Charges on Share Trading Explained. Brokerage, STT, DP & More: There are a number of charges and taxes involved while trading in India i.e. buying or selling of shares. Some of them are quite popular like Brokerage Charge & GST, while there are many others that the traders and investors are not aware of. In this post, I am going to explain all types of different charges on share trading. Some common ones are brokerage charges, Security transaction charges (STT), stamp duty, etc.

Anyways, before we start discussing them, let us spend a few minutes to learn a few basics things that you need to know first. So, be with me for the next 10-12 minutes to understand the explanation of all the different charges on share trading. Let’s get started.

1. Intraday Trading and Delivery

A lot many beginners trades in stocks and confuse it by investing or delivery. However, both of them are really different:

  1. Intraday Trading: When you buy & sell a share on the same day, then it’s called Intraday trading. For example, you bought a share in the morning and sold it before the market closes on the same day, then it will be considered as an intraday
  2. Delivery Trading: On contrary to Intraday, when you buy a share and hold it for at least one day, then it’s called a delivery. For example, you bought a share today and sold it after three days (or any day but today) then it will be considered as a delivery. Here you can sell the stock tomorrow, or the day after that, or a week later, a year later or 20 years later.

 2. Full-Service Brokers and Discount Brokers:

  1. Full-Service brokers: These are the traditional brokers who offer full-service trading services in stocks, commodities, currencies, mutual funds, etc along with research and advisory, portfolio and asset management, banking all in one account. For example, ICICI Direct, Kotak Securities. HDFC securities, etc.
  2. Discount brokers: These are those budget brokers who offer high speed and the state-of-the-art execution platform for trading in stocks, commodities and currency derivatives. They charge a reduced commission (flat price) and do not provide trading advice. For example, Zerodha, 5Paisa, Angel Broking, Trade Smart Online, etc.

Also read: 8 Best Discount Brokers in India – Stockbrokers List 2020

In general, a full-service broker charges a brokerage between 0.03% – 0.60% of the transaction volume while trading in stocks. On the other hand, the discount brokers charge a flat fee (fixed rate of Rs 10 or Rs 20 per trade) on intraday. The majority of discount brokers also do not charge any fee on delivery trading.

It is important to note that you have to pay a brokerage charge on both sides of trading i.e. while buying a share and selling a share.  Let’s take an example to understand the brokerage charge better.

Suppose there is a brokerage firm called – ABC. Now, this broker charges a brokerage fee of 0.275% on intraday trading and 0.55% on delivery trading. The total charges on both tradings can be given as-

 Intraday TradingDelivery Trading
Brokerage0.275% of total turnover0.55% of total turnover
TurnoverIf you buy 100 stocks at Rs 120 and sell at Rs 125, total turnover is (120*100+ 125*100=) Rs 24,500If you buy 100 stocks at Rs 120 and sell at Rs 125, total turnover is (120*100+ 125*100=) Rs 24,500
Total Brokerage CostTotal brokerage charge on Intraday trading (for both buying and selling) = 24,500 * 0.00275 = Rs 67.38Total brokerage charge on Delivery (for both buying and selling) = 24,500 * 0.0055 = Rs 134.75

As the competition among the brokers is continuously increasing, these brokerage charges offered by the different brokers are also decreasing. For example, the discount brokers like Zerodha offers a flat fee of Rs 20 or 0.01% on Intraday trading (whichever is lower) and Delivery investments are FREE. Therefore, for the above table, assuming the same scenario, the person would be paying only Rs 2.45 in Intraday Trading and Zero Brokerage on Delivery, if he prefers Zerodha as its broker.

Now, apart from brokerage charges, there are also an additional couple of charges and taxes to be paid while share trading. As already mentioned earlier, some of them are Security transaction tax, service tax, stamps duty, transaction charges, SEBI turnover charges, depository participant (DP) charges, and also capital gain tax (which you’ve to pay at the end of the financial year but not while transacting).

Let’s understand these other different charges on share trading and taxes involved first. Further, we will also discuss an example at the end of this post to understand the charges and taxes involved better.

Different Charges on Share Trading

– Security Transaction Tax (STT)

  1. Apart from brokerage, this is the second biggest charge involved while trading in stocks.
  2. For delivery trading, STT is charged on both sides (buy & sell) of transactions and is equal to 0.1% of the total transaction price (on each side of trading).
  3. For intraday and derivate trading (futures and options), STT is charged only when you sell the stock. For intraday, the STT charge is 0.025% of the total transaction price while selling.
  4. For equity Futures, the STT is equal to 0.01% on the sell-side. On the other hand, for equity options trading, STT is equal to 0.05% on sell-side (on premium).

– Stamp Duty:

The stamp duty is charged by the state government. However, this charge is not similar across all the states in India. Different states charge different stamp duty. Here are the stamp duty charged by a few of the big Indian states:

StateIntraday EquityDelivery EquityFutures EquityOptions Equity
Maharashtra0.002%0.010%0.002%0.002%
Delhi0.002%0.010%0.002%0.002%
Gujarat0.002%0.010%0.002%0.002%
Karnataka0.003%0.003%0.003%0.003%
Tamil Nadu0.006%0.006%0.006%0.006%
West Bengal0.002%0.010%0.002%0.002%

Stamp duty is charged on both sides of transactions while trading ( i.e. buying & selling) and hence are charged on the total turnover.

– Transaction Charges

  1. The transaction charges is charged by the stock exchanges and that too on both sides of the trading.  This charge is the same for intraday & delivery trading.
  2. National stock exchange (NSE) charges a fee of 0.00325% of the total turnover as Transaction charges on Equity and Delivery Trading. On the other hand, Bombay stock exchange (BSE) charges a fee of 0.003% of total turnover as Transaction charges on Equity and Delivery Trading.
  3. For Derivatives trading, BSE doesn’t cost any transaction charges. However, on NSE, the Exchange transaction charge is 0.0019% for futures trading and 0.05% of total turnover for Options Trading.

– SEBI Turnover Charges

  1. SEBI stands for the Securities exchange board of India and it is the security market regulator. SEBI makes the rules and regulations on the exchanges for its proper functioning.
  2. SEBI Turnover fee is charged on both sides of the transaction i.e. while buying and selling and is the same for all equity intraday, delivery, futures, and options trading.
  3. The SEBI turnover charge is equal to Rs 10 per crore of the total turnover.

– Depository Participant (DP) Charges

  1. There are two stock depositories in India- NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited). Whenever you buy a share, it is kept in an electronic form in a depository. For this service, the depositories charge some fixed amount.
  2. The depositories don’t charge the traders or investors directory but charge the depository participant. Here, the brokerage firm or your demat account company is the depository participant (DP).
  3. DP acts as a linkage between the depository and the investor as the investors cannot directly approach the depository. In short, the depository charges the DP and then the depository participant (DP) charges the investors.
  4. For example, while trading with Zerodha, DP charge is equal to ₹13.5 + GST per scrip (irrespective of quantity), on the day, is debited from the trading account, i.e. when stocks are sold. This is charged by the depository and depository participant.

– Goods & Service Taxes (GST)

GST is the mandatory tax levied by the government on the services rendered and is equal to 18% of total brokerage and transaction charges.

open account with zerodha

– Capital Gain Taxes

Lastly, Capital gain taxes is the most important tax to understand in this article for the traders and investors. We are not going to cover all the details regarding capital gain taxes in this article, but just a short over. If you want to read the complete details, you can refer to this article.

  1. There are two types of Capital gain taxes in India – Short-term capital gain tax and Long-term capital gain tax.
  2. When you sell a stock before one year of buying, then it is considered as a Short-term. Here a flat 15% of the profit is charged as short-term capital gain tax.
  3. When you sell a stock after one year of holding, then it is called the long-term. For the long term capital gain, you have to pay a tax equal to 10% of the gains, if it exceeds Rs 1 lakh.
  4. For Intraday Traders, they need to pay taxes on their capital gains which depends on their tax slab. For example, if you’re in the highest tax slab and made some profits while intraday trading, you’ve to pay taxes of 30% on those gains.

Example of Different Charges on Share Trading

Now, let us see an example to understand these different charges on share trading and taxes involved better. Suppose there are two traders- Rajat and Prasad. Here, Rajat is a delivery trader who invests in the long-term i.e. for 2-3 years. On the other hand, Prasad is an intraday trader.

They both have their accounts in the same discount brokerage company named ABC. The brokerage charge for ABC is Rs 20 Per trade on intraday trading and FREE for delivery trading.

Also, let us suppose that both Rajat and Prasad have traded a total turnover of Rs 10,000 in a share (i.e. total cost involved while buying and selling). In addition, they both live in Maharastra.

Now the different charges and taxes paid by them for complete trading i.e. from buying to selling the shares can be given as-

 Prasad (Intraday Trader)Rajat (Delivery Trader)
Buy Price120120
Sell Price125125
Quantity400400
Total TurnoverRs 98000Rs 98000
ExchangeNSENSE
StateMaharashtraMaharashtra
Brokerage ChargeRs 40 (Flat Rs 20 Per trade i.e. Buying & Sellling)Rs 0 (FREE Delivery Trades)
STT0.025% of sell side = 0.025 % of Rs 50,000 = Rs 12.50.1% on buy & sell = 0.1% of 98000 = Rs 98
Stamp Duty (Maharashtra)0.002% of total turnover = 0.002% of 98000 = Rs 1.960.01% of total turnover = 0.01% of 98000 = Rs 9.8
Transaction Charges0.00325% of total turnover = 0.00325% of Rs 10,000= Rs 3.180.00325% of total turnover = 0.00325% of Rs 10,000= Rs 3.18
SEBI Turnover ChargesRs 10 / Crore of Total Turnover= Rs 0.10Rs 10 / Crore of Total Turnover= Rs 0.10
GST18% on (brokerage + transaction charges) = 0.18 * (40+ 3.18)= Rs 7.7718% on (brokerage + transaction charges) = 0.18 * (0+ 3.18) = 0.57
Total Brokerage And Taxes65.51111.65
Total Profit or Loss1934.491888.35
Capital Gain TaxDepends on the tax SlabDepends on Short/long term

At first glance, it looks cheap to invest in intraday as the total charges are comparatively less here. But you should note that the frequency of trading for intraday traders is quite high. Many intraday traders easily make 2-3 high volume trades every day. So, they have to pay these brokerage charges and taxes again and again. On the other hand, delivery traders or long-term investors do not make such frequent trades.

Overall, charges and taxes are a very important part of trading and should not be ignored. You might think that you are in profit, but the real profit is the one which is left after deducting the charges and profit. I hope the traders will keep this in mind before trading the next time.

Zerodha Brokerage Calculator

Before ending this article, here’s the brokerage calculator for equity trades using Zerodha, the discount broker.

Quick Note: If you’re interested in opening your demat account with Zerodha, the No 1 stockbroker in India, here’s a direct link to the account opening page.





That’s all for this post. If you’ve any doubts related to the different charges on share trading in India, feel free to comment below. I’ll be happy to help you out. Cheers & Happy Trading!

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Comments
  • Dear Mr. Kritesh,
    Very educative article for novice. I am doing short term trading for last one year and not knowing fact taxes. When I did calculation back on my profit (What I was thought) observed no profit at all after deducting the tax at the rate of 15% on delivery trading. Your article would definitely help and assist to know the profit and whether selling the share would be profitable or not. HATS UP!!! Thank you very much!

  • Manjiri says:

    Thanks a lot for sharing this post. It gives a summary of tatal expenses incurred on one’s turnover. The post is very illustrative and well explained. I was looking for such summary of all taxes and charges and their comparative analysis for intraday and long term investment.

  • Very detailed article. Good work.

  • S karthikeyan says:

    Great article.kindly include get also as per current tax system.thanks.god bless!

  • Arjun Acharjee says:

    I am very happy to know from you about stock market

  • Ravindra Thakur says:

    Explained in very simple words. Normally we beginners won’t give any credential to various charges and tax while looking at profit.

    • Charges and taxes are important and the beginner’s should ignore it. I’m glad it was helpful to you.

      • Vaibhav Rane says:

        Yes that was helpful thank you.

      • Kunal says:

        Please reply my following doubt ..
        1) Is it mandatory to decide wether the share is intraday or delivery before buying the stock ?
        2) Some brokers are claiming of free delivery . Is it means i will not pay any brokerage for delivery stock ?

        • Hi Kunal. 1) There’s no need to specify whether Intraday or Delivery 2) Yes, Delivery trading is free for most discount brokers. However, there are additional mandatory charges like STT, Stamp duty, SEBI charges, etc which you have to pay while trading. Here, brokers are not charging anything. I hope it helps.

  • Krishnan says:

    Dear Krit,
    Surely, Well done.
    A good job with good intention and thanks a lot ….
    very helpful tips provided and anticipating such always!
    Best wishes,
    Kris

  • Krishnan says:

    Dear Krit,
    I have bought a scrip and on the 3rd day the broker informing that they are unable to deliver the same, due to short delivery and they may be credit the purchase amount to me.
    NB:in those 2 days the scrip has been appreciated by about 10% (2 upper circuit)
    How such cases are treated by NSE/BSE? what I understand is, any short delivery quantity will be auctioned by the exchange on the delivery day at that day’s price and will be delivered to the buyer AND the auctioned amount will be debited to the seller.
    Could you please update whether the above is the right way OR any other methos is there as per BSE/NSE or SEBI norms?
    please advise.
    thanks
    regards
    Kris

  • vijay says:

    sir if i puchase shares of rs 2000 @10/- per share and sale at 11/- after1 month then what will be the charges
    and please share whether it is profitable or loss deal

    • Hi Vijay. What I get from your comment is that your Buying price= Rs 10, Selling Price= Rs 11, Quantity=2000.
      Let’s assume total charges of 0.6% (Brokerage, GST, stamp duties etc) which is applicable on both sides of transactions i.e. buying and selling. (The charges will differ for discount brokers).
      Therefore, charges while buying = 0.006* (20,000) = Rs 120
      Charges while selling = 0.006* (22,000)= Rs 132
      Now, Your net profit will be Rs 2000 (10% capital gain as the stock rises from Rs 10 to Rs 11).
      Next after selling, you have to pay a short-term capital gain tax of 15% = 15% of 2000= Rs 300
      Overall, you will make profit of Rs 2000 – (Capital gain taxes + charges) = Rs 1450 (Approx)
      I hope it helps.

  • Vaibhav Balasaheb Kalokhe says:

    Hi Kritesh, excellent articles you have written on stock market. it is really very helpful & knowledgeable articles those who are interested to invest in stock market.

  • Suresh says:

    Hi Kritesh, Nice Article. A small suggestion is to elaborate on intraday charges based on stock price, any specific charges for after hour orders, penalty where applicable, etc..

  • Milind Chari says:

    Hi.. Nice article. All types of charges nicely explained by you. Thank you for the same. I still have a query, if you could advise on the same, recently i sold my shares of about 30 companies total worth of Rs 81000/-. I received an invoice from my broker where in i was charged Rs 100 per company held be me, i.e. 30 companies x Rs 100 = Rs 3000.

    NOTE: These shares were held by me for over 12 months.

    Are there such charges over and above the brokerage & other charges, that the brokerage can charge its customers?

    Please advise.

    Regards

    Milind Chari

    • Hi Milind. I’m not aware of any such charges. Further, in any transaction, the biggest charge is brokerage- which cannot exceed 2.5% (as per SEBI guidelines). This charge is even bigger than brokerage. If you can share the invoice, I can give you a confident answer. You can contact me on facebook here.

  • Sharita Skala says:

    This site is absolutely fabulous!

  • mithun says:

    i m new to investing in shares…..would like to know meaning of ” pay falt Rs.20/- brokerage per lot of options”…..

    • Hi Mithun. I’ll explain in in simple words. Flat rates means that the brokerage doesn’t depends much on the investment amount. For example, if a full-service broker is charging 0.5% per transaction, this means that the brokerage for a transaction of Rs 10,000 and Rs 50,000 will be different- 0.5% of both the costs. However, for flat charges, the brokerage is same i.e. Rs 20 for all these transactions. I hope it helps. Cheers!

      • ABHIJIT PATIL says:

        Hi Kritesh, Please guide me for query mentioned here. As per above details,
        1. Broking firm will charge Rs. 20 as flat brokerage in both i.e buy and sell of stocks. Please clarify.
        2. If brokerage (by 0.5%) is higher (Eg: Rs.55) than flat one as Rs.20 for both (buy/sell) then which brokerage will be applied.?
        3. I am planning to open DMAT+Trading a/c. Which one is best Upstox or Baroda Bank? please help. Thanks.

        • Hi Abhijit, here are the answers to your questions: 1) Whenever you trade in stocks, let’s say you buy stocks worth Rs 10,000, you have to pay Rs 20 flat as brokerage charges. 2) If the broker is charging a fixed brokerage rate of Rs 20, then this is the maximum brokerage that you’ve to pay 3) Upstox is better according to me. I hope it helps.

  • Paresh Shukla says:

    very very informative, even being there in the same industry since last 10years never gave much attention to those charges.
    Thanks a lot for highlighting those charges.
    Regards,
    Paresh

  • Madhu says:

    Good knowledgeable article

  • Samtha says:

    I appreciate your efforts of educating the mass. An informative article indeed. Want to know and learn how to pick good equities for long time on monthly basis.thanks sir

  • AKSHAY says:

    Sir can you please confirm on STCG and LTCG tax. I read from some other sites that even LTCG are taxable as of now.

    Also, is it that any amount of profit we make is taxable ? Or only if our returns are greater than 1L then it is taxable ? As in banks and FDs.

    Pls confirm.

    • Hi Akshay, both Short term and long term gains from equity are taxable now. For short-term, the tax is 15% on the profits. For long term, the tax is 10% for profits above Rs 1 lakhs. I hope it helps. Cheers!!

  • Roberto says:

    This is actually useful, thanks.

  • Chet says:

    Thanks, it’s very informative

  • Marjorie says:

    This is really helpful, thanks.

  • Tahlia says:

    Thank you for the great article

  • lalit says:

    what a good article it is. thanks so much

  • NagendrA says:

    Nice article Mr.Kritesh Abhishek. Very much helpful for a beginners like me.
    After paying all the brokerage charges, at the end of year during IT returns again we have to pay IT based on P&L. With this can you please suggest as a thumb rule if one has to sell what should be min margin so that there won’t be any loss

  • c.krishnan says:

    Thank you very much for your hardwork

  • Sunil Khanduri says:

    Hi, Kritesh, very very informative article. Infact one stop solution for all overheads related quarries on equity trading. Till now I have been doing trading without considering these incidentals. Love you brother

  • Manish pahwa says:

    Thanks for this precious knowledge for traders .keep sharing ur experiences best of luck.

  • Sandeep says:

    will it be loss if I purchase share in interval. for eg Want to purchase axis bank share-500 nos.
    If purchase 100 shares 5 times and purchasing 500 nos. one time will have same charges?

  • SHAM PATIL says:

    Sir which one is the best for intraday as well as delivery
    Zerodha or Motilal Oswal

  • Madhavan says:

    Why you multiply SST, a brokerage charge with 2? If i am a buyer I am goning to pay my part, seller going to pay their part. How come both will come to buyer side?

  • NANDKUMAR says:

    Hi Kritesh,
    It is a very excellent articles you have written on stock market. it is really very helpful & knowledgeable articles for the beginners and are interested to invest in stock market. Thank you!

  • JAGDEEP SINGH says:

    Hi Kritesh Ji
    Your explanation about various types of charges is great. Can you please suggest me some books to know about basics of Indian stock market (in hindi medium only)?
    Thanks.

  • Subhash says:

    Hi Sir,
    This Article was very useful. I would like to invest but confused to which one to choose (3-1 account or 2-1 account).If 3-1 which one should i choose (ICICI or HDFC) . Or if 2-1 which one should i choose (Zerodha or Upstock). Require your valuable advice. Thanks in Advance.

  • Amit Jha says:

    This proved out to be a one stop solution for all doubts. Thnks

  • Noora says:

    really appreciate how deeply u explained it.

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