7 Costs Associated with Trading that you Must Know!

  • Stock Market Analysis
  • Editors Pick

We all know that there is a cost one has to pay in order to trade/invest in the market. However, most of us are only aware of the brokerage that we pay to our stock broker, but not other types of costs. There are many intermediaries in the stock market that help to facilitate all transactions and each of them charges their own fee to provide their services.

Here, I will go through all these costs that you incur while executing positional equity trades. The sole purpose here is to make you aware of the price you pay to trade which eventually piles up to a significant amount trade-after-trade. This would also help you to calculate your break-even levels better, taking the cost into consideration.

Brokerage 

The primary cost is the brokerage you pay to your stock broker on every buy/sell transaction. Brokerage varies from broker to broker. Some charge a % of your transaction value (buy & sell), while some charge a flat fee, irrespective of the transaction value. Nowadays, there are brokers that don’t charge any brokerage on equity trades.

Securities Transaction Tax (STT)

Securities Transaction Tax or STT is a tax that is charged by the government when you transact through a recognized exchange such as BSE and NSE. This is 0.1% of the transaction value on both the buy and sell sides. 

Transaction Charges

Transaction Charges are essentially a source of revenue for exchanges. The NSE charges 0.00345% while the BSE charges 0.00375% of the transaction value. 

Depository Participant Charges

A depository Participant or DP is an entity that acts as an intermediary between the Depository and the end trader/investor to offer services such as account opening, maintenance of securities’ records, etc. A DP charge is the revenue for the Depository and DP. While there are many DPs in the country, there are only two Depositories - CDSL (NS: CENA ) & NSDL and both charge a different fee + GST. Also, the total DP charges may vary from broker to broker slightly. Generally, it's between INR 15 - INR 20 per debit transaction per scrip. There are no DP charges lived on the buy transactions, it's only on the sell side, and that too, irrespective of the number of shares being sold.

Whether you sell 1 share or 1,000 shares of a company, your DP charges will be flat per transaction. However, if you choose to sell your holdings of the same scrip in tranches, then you will have to pay multiple charges (a flat fee per transaction x no. of transactions) on every sell transaction (irrespective of the quantity).

Goods and Services Tax 

Goods and Services Tax or GST is levied by the government and is calculated as 18% of the (brokerage + transaction charges + SEBI charges).

SEBI Charges

The Securities and Exchange Board of India or SEBI is the market regulator which keeps a tab on fraudulent activities, brings innovative frameworks, regulates all the market participants, etc. SEBI charges is revenue for the SEBI which is very minimal, INR 10 per INR 1 crore of the transaction value.

Stamp Duty

Stamp Duty is again charged by the government, which is 0.01% of the transaction value.

Most of these charges are calculated on transaction value, so how do you calculate that? It’s simply the total worth of shares you have transacted. If I buy 10 shares worth INR 1,000 each, my buy-side transaction value becomes INR 10,000. To square off this position, if I sell these shares at the same rate, my sell-side value also becomes INR 10,000. Adding both of these will give the total transaction value of the trade, i.e. in this case, INR 20,000.

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  • namami ghosh @namami ghosh
    would be great if you could give a breakdown for leading brokers
    Like 1
    • namami ghosh @namami ghosh
      Yup ... primarily that... plus other features such as ease and speed of opening accounts, operational ease and smoothness of transactions, speed, responsiveness to customer complaints, charges for intraday, delivery and other trades, and so on ... a comparative analysis if you will ...
      Like 0
    • namami ghosh @namami ghosh
      @namami ghosh also, the advantages and disadvantages of classical and new age brokers (e.g. physical presence or lack thereof) ...
      Like 0
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      Like 1
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  • Suhaib Syed @Suhaib Syed
    Aayush you're wrong on two counts: DP Charges are not ₹15.93. There are three components to it: first is the charge collected by the actual depository which is fixed at ₹9 per scrip, the second component is what is added by the Depository Participant (aka your broker). This varies from broker to broker. For example HDFC Securities may charge ₹50 while Finvasia charges nil; ShareKhan charges a maximum of ₹21 and absorbs it into brokerage if brokerage for the transaction is not than 21. The final component is tax on the other two at the rate of 18%. This also you missed while mentioning GST.
    Like 1
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      Hi Suhaib, thanks for the correction. Actually, there are two Depositories as well which also lead to different charges.  And for the GST part, it was included in the total charges, but now have mentioned separately.
      Like 0
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  • Dharma Nitheesh @Dharma Nitheesh
    correct sir
    Like 0
  • yatin modi @yatin modi
    thanks for detailed info
    Like 0
  • namami ghosh @namami ghosh
    that's a very exhaustive coverage that retail investors and traders need to know. thank you, Aayush
    Like 1
  • Kalpesh Gohil @Kalpesh Gohil
    the most important cost is mental peace... that you lost while trading...
    Like 1
  • Himal Parikh @Himal Parikh
    Options trading costs?
    Like 0
  • Arjun Dumbre Patil @Arjun Dumbre Patil
    Good Information. However not mentioned Income Tax component .Pl update and highlight how IT is levied.?
    Like 2
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      IT is levied on profits. STCG -15%, LTGC - 10% (flat).
      Like 0
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  • Chandra Nagar @Chandra Nagar
    Very well explained
    Like 0
  • Sunil Dani @Sunil Dani
    Nicely explained!
    Like 0
  • Ria Singh @Ria Singh
    thanks for the breakup 👍
    Like 0
  • Manu Pandit @Manu Pandit
    Also capital gains.
    Like 1

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