Brokerage, other charges and tax details

Posted on 19th Apr 2016
by Admin


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Trading charges or brokerage charges :

This is the total trading charges that a client has to bear for trading in equity,derivative,commodity or currency. It is calculated by sum up all the taxes and charges that is levied on top of your brokerage. The charges and taxes are Transaction Charges, STT or Securities Transaction Tax, Service Tax, Stamp Duty and SEBI Charges.

Brokerage

Brokers are free to charge brokerage against the services they offer to their clients as per their business model.There is no minimum limit but there is maximum limit of 2.5%. No broker can charge brokerage higher than this. Usually,full service brokers charge in % basis while discount brokers charge a flat fee irrespective of volume of trade or charges a fixed monthly fee. Depending on brokerage, customer need to pay service tax.

SEBI charges

SEBI or Securities and Exchange Board of India charges for purchase and sale transactions of securities in India. It is fixed charge of Rs 20/crore or 0.0002% for equity delivery,intraday,derivative and currency F&O. There is no SEBI charges on commodity.

Exchange Transaction charges

It comprises of two charges viz turnover charges plus clearing charges. Turnover charges is a fee levied by Stock exchanges like NSE, BSE and MCX for trade executed through them. It varies with segment and stock exchanges. Clearing charges are the charges which broker pays to professional clearing members to clear the trade. Broker charges both of it to the clients to pay it off.

  • National Stock exchange of India (NSE) charges Rs 325 per crore for Equity trades , Rs 190 per crore for Equity Futures , Rs 5000 per Crore for Equity options on premium value.
  • BSE LTD (BSE) charges Rs 275 per crore for Equity trades except XC, XD, XT, Z and ZP groups, Rs 50 per crore for Equity Futures, Rs 2500 per Crore for Equity options on premium value. BSE transaction charges in XC, XD, XT,Z and ZP groups is Rs.10,000 per crore.
  • Professional Clearing Member charges (PCM) is optional, but if broker is charging then he has to give it to PCM.
STT or Securities Transaction Tax

As the name implies this is the tax imposed on transactions in stock, index options and futures. It is not charged on bond, currency and mutual fund. STT varies for Equity (Cash) and F&O transactions. For delivery based trading, it is charged on both purchase and sale side. For intraday and F&O segment, it is only charged on sell side.

  • Equity Intraday - .00025% on Sell side only
  • Equity Delivery - 0.1% on Buy and Sell both side
  • Future - .0001% on Sell side only
  • Options - .00017% on Sell side only

STT on commodity is called CTT or Commodity Transaction Tax. CTT is not applied on certain agro commodities but it is applied on all non agro commodities like gold, silver and non-ferrous metals such as copper and energy products like crude oil and natural gas.

Stamp Duty

Stamp Duty is the State Government tax levied on instruments and documentation. The levy of stamp duty is a state subject and thus the rates of stamp duty vary from state to state. In Maharastra, it is .01% for equity delivery and .002% for derivatives.The broker charged the stamp duty from the state which he issues the contract notes from and not from the state you lives in.

Service Tax

Service tax is levied on all services provided in India. The new service tax rate is 15% in India. For securities transaction, it is calculated on brokerage charges plus transaction cost.

  • Service Tax = 15% of (Brokerage + transaction charges)

Formula for brokerage calculation or Brokerage Cost

Total Tax and Charges = Brokerage + Exchange Transaction charges + STT + Stamp Duty + SEBI charges + Service Tax (Brokerage + Exchange transaction charges)

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User Comments

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2. Kunal  Apr 19, 2016 7:23:35 PM IST Reply
why Zerodha is charging high transaction charges for NSE F&O ?
avatar
1. Arun Gandhi  Dec 30, 2016 3:56:54 PM IST Reply
I have sold 2 Shares of Network 18 @ Rs.37.85 = Total Rs.75.70 ...on which Brokerage @ 0.0568 per share ( @ 0.15% ) was difference brokerage + Service Tax ).
Can they maximum Brokerage allowed by SEBI = 2.5 % )
Further if they are Minimum Rs.16 /- on a sale of Rs.100 /- ) ....but they are not using the word "Brokerage" ...but instead using some other words ....like "delivery handling charges" .....is it permissible

They are charging the additional Brokerage in the Ledger ...and not on Contract Note ....so that they would be seen as complying with SEBI Rules .

So basically I want to go behind the Rationale ....of why has SEBI given the restriction of 2.5 % ....and what does the word "Brokerage" include . Is it the total charges for Trading that can be collected from the investor ....or is it that the word "Brokerage" should not be used for charges of more than 2.5 % .....after that the Broker is free to charge any amount from the investor ...by using some other word .....like " extra Charges "

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