What Are The Different Charges For Buying And Selling Shares In India: Did you know that apart from analyzing the stock it is also important to analyze the app you use and the charges they levy.
This is important as some of the costs can directly impact the returns generated on the stock. For example, an investor may consider selling a share after he/she sees a small amount of profit.
However, it will not make sense if he/she pays higher commissions or brokerage charges. In this article, we look into the different charges for buying and selling shares in India that an investor needs to pay.
Read on to find out what charges can impact the overall profitability of the stock.
Charges For Buying And Selling Shares In India
When an individual buys or sells shares, they are required to carry out the transaction with the help of a broker. Several costs are involved in these transactions which an investor should understand to arrive at the real purchasing or selling cost.
As the name dictates, this is the charge which is levied by a stock broker for transactions that are carried out by an investor on the basis of the contract or a flat rate as decided among the parties.
Brokers can be of two types: Full-service brokers and Discount brokers. Full-service brokers offer all-inclusive trading services including stocks trading, currency trading, commodities trading, and some other related services about research advisory, management, investment banking, etc.
Discount brokers offer investors an execution platform related to trading and they charge a commission for the services they provide. However, they don’t provide any sort of investment advisory services.
Apart from brokerage, there are other charges for buying and selling shares in India. The following are those charges:
2. Securities Transaction Tax
This charge is the mandatory charge which gets levied as a percentage. Investors should know that the STT rate is 0.1% of the transaction value for delivery-based equity share trades.
This charge is levied on both sides of the buy and sell transaction. If an investor does intraday trading, STT is charged when he/she sells the stock.
3. Stamp Duty And GST
Stamp duty is levied by the state government. This is because the transaction involves the transfer of security from one party to another.
GST (i.e., Central and State GST) gets levied as a percentage of the brokerage which is paid on the transaction. As of now, the rate is 9% CGST and 9% SGST.
4. Transaction Charges
Transaction charges are the charges which are levied on both sides of trading by stock exchanges. A transaction fee of 0.00325% of the total amount is levied by NSE and a transaction fee of 0.00275% of the total amount is charged by BSE.
5. Depository Participant (DP) Charges
In India, two stock depositories are available- Central Depository Services Limited and the National Securities Depository Limited. Both the depositories levy DP charges as they keep an investor’s transactions in electronic format.
Investors should know that stock depositories do not charge an investor or trader directly. They charge depository participants i.e., an investor’s brokerage firm or Demat account company. Then that DP charges an investor or trader.
6. Securities And Exchange Board Of India (SEBI) Turnover Charges
SEBI, the regulator of the securities markets in India, levies this fee on both sides of a trading transaction. SEBI charges a turnover charge of ~0.0002% of the total amount. These costs are the same for both intraday and delivery trading.
7. Capital Gains
According to the holding period, the tax gets applied to the profit earned from selling the shares. If an investor sells the shares before one year and makes a profit, he/she is liable to pay short-term capital gain tax (STCG).
If an investor sells the share after a period of one year or more and makes a profit, he/she is liable to pay long-term capital gain tax (LTCG) on the profits made over INR1 lakh.
These are the charges for buying and selling shares in India which every investor or trader should be aware of to calculate their net gain or loss.
To Sum Up
Profit refers to the difference between the amount which is paid by an investor and the final amount which he/she has earned. Therefore, an investor should include all the charges for buying and selling shares in India involved in the whole transaction.
Therefore, to calculate the profit, charges including brokerage fees, STT, etc. are required to be included.
Given that most of the charges are fixed, an investor can compare these charges charged by different brokers before they decide to choose between discount brokers or full-service brokers. That’s all for the article on Different Charges For Buying And Selling Shares In India, We hope you enjoyed reading it. Happy Investing!
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