There are a lot of different charges involved in share market trading. Consider these charges as a capital investment that will earn you a regular income. Some of the most common charges are brokerage charges Demat account charges and many more.
If you wish to enter the share market trading space then you need to know the following details:
The two types of brokers:
- Full-Service Broker: These brokers have been providing their services for ages. They are the traditional brokerage firms that provide full services along with buying and selling of securities. Full services such as industry and stock-specific research reports and give buy/sell calls to their clients.
- Discount Broker: They are the new age brokers, popularly called internet brokers. Unlike full-service brokerage firms, they aim to provide a platform only for buying and selling. Their main selling point is to provide a user-friendly trading platform.
Different charges involved in share market trading:
- Security Transaction Tax (STT)
After brokerage fees and demat account charges, this is the biggest charge levied on an investor. It is charged on both; buy and sell sides of trading. 0.01% is charged on delivery trades (on both buy and sell) and 0.025% is charged on intraday and derivative trades (on the sell-side).
- Stamp Duty
According to the new rule, w.e.f 1st July 2020, stamp duty is charged by the state departments to the buyers.
- Demat Account Charges
Demat account opening is a simple process and it is charged. It is a nominal fee that has to be paid by you to the broker while applying for a Demat account.
- Transaction Charges
It is a compulsory charge that an investor has to pay to the stock exchanges for both intraday and delivery charges. For cash trades, the national stock exchange (NSE) and Bombay stock exchange (BSE) charges 0.00325% and 0.003% respectively.
For derivatives trading, the national stock exchange charges 0.0019% on futures and 0.05% on options trading.
- Securities Exchange Board of India (SEBI) Turnover Charges
The stock exchange market regulator SEBI charges Rs.10 per crore for the regulatory services. The fee is charged on both; buy and sell-side transactions.
- Depository Participant (DP) Charges
Whenever an investor places a buy order the depositories hold these shares in their account in electronic form. For providing this service they charge a certain fee from the depository participants.
Since the depository participant is a mediator that bridges the gap between depositories and investors, you as an investor pay to the DP and then the DP pays to the depositories.
There are two depositories in Indian stock markets; Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL).
- Goods And Service Tax (GST)
It is a tax levied by the union government of India that is mandatory for all to pay. 18% tax is levied on the total transaction fee.
- Capital Gain Tax
In India, there are two types of capital gain taxes: Short term capital gain tax and Long term capital gain tax.
Long Term Capital Gain Tax (LTCG)
When the shares are held in Demat account for more than a year, it is called long-term. If the proceeds from those shares are more than 1 Lakh, then 10% tax is levied.
Short Term Capital Gain Tax
If the shares are sold in less than a year then an investor has to pay a short-term capital gain tax on the income.
As you know how beneficial a Demat account is for investors. The Demat account takes care of everything. You can access securities in your Demat account online across the globe anytime. Its entry in the stock market has saved you from a long process to buy and sell shares. You do not need to purchase share transfer stamps, thereby reducing the cost for investment. Demat account charges cover all the account maintenance services offered by the depository participant (DP).
The Demat account charges will depend on what type of brokerage services you require to invest in the stock market.
Demat and trading account fee is the composition of following small charges that may vary from broker to broker:
- Account Opening Charges
- Dematerialization Charges
- Rematerialization Charges
- Account Maintenance Charges
- Debit Transaction Charges
- Off-Market Debit Transaction Charges
- Delivery Instruction Slip Charges
- Advisory Charges
- Account Statement Charges
- Account Updation Fee
- Pledge Creation Fees
These are the charges an investor should be aware of before planning on investing. This will help you in making a budget and intraday or positional traders can decide upon the capital required. If you are planning to invest your money then you should get knowledge about the process of opening demat account, trading account and documents required to open these. You should have knowledge about the market. You can compare the fees and charges of different brokers.