Brokerage, other charges and tax details

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Brokerage, other charges and tax details

Trading charges or brokerage charges explained

In this article we are going to discuss total charges which need to pay when you perform a trade. There are two parts of this - one brokerage, charged by broker, the second part is other charges and taxes. In the second part you need to pay Transaction Charges, STT or Securities Transaction Tax, GST, Stamp Duty and SEBI Charges.

Brokerage

Brokers are free charged by the broker. There is no minimum limit, but there is a 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 the volume of trade or charges a fixed monthly fee. Depending on the brokerage, GST needs to pay for brokerage.

SEBI charges

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

Exchange Transaction charges

It comprises of two charges turnover charges, plus clearing charges. Turnover charges are a fee levied by Stock exchanges like NSE, BSE and MCX for trade executed through them. It varies by segment and stock exchanges. Clearing charges are the charges which broker pays for 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 charged on both buy and sell side. For Intraday and F&O segment, it is only charged on the 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 does not apply to certain agro commodities, but it does apply to 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 0.01% of equity delivery and 0.002% of derivatives. The broker charges the stamp duty by the state which he issues the contract note from.

GST

GST is levied on all services provided in India. The new GST rate is 18% in India for trading. For securities, transaction, it is calculated on brokerage charges plus transaction cost.

  • GST = 18% of (Brokerage + transaction charges)

Formula for brokerage calculation or Brokerage Cost

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

Last updated on 5th Jun 2019

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User Comments

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3. Nitin  Mar 31, 2018 12:30:09 AM IST Reply
Less brokerage save more profit....within 1 hour open demat account and start trading ...upto 40 time leavrage in intraday ....Angel Broking
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2. 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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1. Kunal  Apr 19, 2016 7:23:35 PM IST Reply
why Zerodha is charging high transaction charges for NSE F&O ?






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