share market trading charges explained in detail

share market trading charges
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Share market trading charges explained in detail

Before understanding the brokerage Charges Tax and other Charges in the details, we have to learn some basic things. Such as Intraday trading and delivery. If you buy shares and sell them on the same day, then they are called Intraday trading. Example, you purchased the stock today and sell it today. Then that happened Intraday trading. When you buy shares and hold it at least for one night, they are called delivery. As you have purchased the stock today and left today and sell it anytime, it is called delivery trading. Different Brokers have different Brokerage Charges. Nowadays the full-service broker charges between from 0.01% to 0.05% in intraday. And discount broker charges flat for both intraday and delivery, such as 10 Rs per trade, 20 Rs per trade, etc. Some discount brokers do not even charge brokerage on delivery. Broker competition is increasing day by day, through brokerage charges are decreasing. And in the coming time, the rate will also fall below this level. Brokerage charges have to be paid when you buy and sell. Some broker put brokerage charges on one side.

Now assume that there is a brokerage firm named ABC. whose brokerage is 0.04%. Means 100 Rs shares if you are doing buy. So according to the share of 100 Rs Rupee, you will give at 0.04% as brokerage. that means 4 paise you give when you buy & 4 paise you give when your sale the share.

Now come to the delivery charge, nowadays usually delivery charges 0.20% to 0.50%, and even some brokers don't charge on delivery. now assume, a company which name ABC, that company brokerage charge is 0.40% on delivery. So when you buy shares, 40 paise give when buying & 40 paise when you sell, the total broker will charge 80 paise to you. Along with the brokerage charges, you also have to pay taxes and other charges. Such as security transaction type, service tax, stamp duty, transaction charges, SEBI Turnover Charges, Depository Participant Charges, Capital Gain Tax ETC

Let us take an example and understand it in detailed charges.

Let's assume 2 good friends are Rahul and Vinit, Rahul is a long-time investor and likes to invest for a long period i.e. for 2 to 3 years. The same is Vinit an Intraday trader, Suppose Rahul and Vineet have invested in the 10 thousand through NSE ( National Stock Exchange ) the stock market. Let's assume that, they bought 10 shares of Reliance Industries at a price of 1000 rupees. And assume that, both Rahul and Vinit have a Demat account in the same broker, ie ABC Broker. And like we saw, the ABC broker charge in Intraday trading 0.04% & charges 0.40% on delivery. Rahul, who is investing in the long term. for him delivery charges 0.40% of the turnover, that is =

0.40 % 100 * 10000
= 40 Rs

  • Rahul will give 40 Rs as a brokerage charge while buying & 40 Rs Brokerage Charges while selling, Total Brokerage Rahul will pay 80 Rs.

Now Vinit, which is an Intraday trader, for him brokerage charge will happen. 0.04% of the turnover.
0.04 % 100 * 10000 = 4 Rs

  • Vinit will give 4 Rs as a brokerage charge while buying & 4 Rs Brokerage Charges while selling, Total Brokerage Vinit will pay 8 Rs.

Now we will talk about the STT, i.e. the security transaction type. after the brokerage charge, which is the largest charge, that is STT. The STT charges both sides in delivery, buy-side & sell-side. In the same intraday trading, the STT seems to be on the sell side only. 0.1% STT on the whole transaction in delivery. therefore will be STT for Rahul, 0.1% total transaction
0.1 % 100 * 10000 = 10 Rs

  • Rahul will give 10 Rs as an STT charge while buying & 10 Rs STT Charges while selling, Total STT Rahul will pay 20 Rs.

On the whole transaction in Intraday trading, STT charges 0.025%
that is = 0.025 % 100 * 10000 = 2.5 Rs

  • In intraday trading, STT is given only on the sell side, therefore total STT for Vinit 2.5 Rs.

Now talk about service tax, whatever brokerage charge you pay, you pay on that service tax, Which is 15%, For both Intraday and delivery, service tax is the same, And as we know Rahul has paid 80 Rs brokerage charge. therefore service tax for Rahul
= 15% of brokerage charge
=15 % 100 * 80
= 12 Rs

  • and Vinit has paid 8 Rs brokerage charge, therefore service tax for Vinit.
= 15% of brokerage charge
=15 % 100 * 8
= 1.2 Rs 

Next charge is stamp duty, This stamp Duty State Government charges. Individual states have different stamp duties charge. As in Delhi, for both the Intraday and delivery, there is 0.0025% stamp duty charge. let's assume Rahul and Vineet are also from Delhi. and in Delhi, stamp duty charge is the same for both. So let's understand
= 0.0025% of the turnover
= 0.0025 % 100 * 10000
= 0.25 Rs

  • So 0.25 Rs when you buy stock & 0.25 Rs when you sell the stock, that is 0.5 Rs. and both are charge same stamp duty.

Now Come on transaction charges, Transaction charges charge the stock exchange. Transaction charges are the same for both intraday and delivery. NSE National Stock Exchange charges 0.00325% for both Intraday and delivery. The BSE, ie the Bombay Stock Exchange, charges 0.00275% for both.

  • So Rahul and Vinit have also bought share through the NSE. therefore transaction charges

=0.00325 % 100 * 10000
= 0.325 Rs

  • So 0.325 for buy & 0.325 for sale = 0.65 Rs for both Rahul and Vinit.

Next charges are SEBI turnover charges. For both intraday and delivery, SEBI charges are 0.0002%
SEBI Turnover Charge
=0.0002 % 100 * 10000  = 0.02 Rs

  • So 0.02 for buy & 0.02 for sale, therefore Rahul and Vinit SEBI turnover charge is 0.04 Rs.

Now talk about DP charges ie depository participant charges. There are only two depositories in India. NSDL & CDSL. whoever you buy shares for delivery. Them the electronic form is kept in the depository. So the depository charges some fee for this service. Which are between 10 Rs to 35 Rs. DP charges seem to be in delivery only on the sell side. Let's assume that the DP charges of ABC broker are 20 Rs, Then
  • depository participant charges for Rahul = 20 Rs
  • depository participant charges for Vinit = Nil
Vinit's NIl is because depository participant charges are not charged in intraday trading.

Now we will talk about the last tax, which is Capital Gain Tax. Basically, there are two types of capital gains tax.
  1. short term Capital Gain Tax.
  2. long term Capital Gain Tax.
If you hold the shares older than 1 year. So you find short-term capital gains tax on your profits. Which is flat 15%. Whether your tax slab is 30% or 10%. for you, short term capital gains tax will happen 15%.

But this rule does not apply to Intraday Trading. If you are an intraday trader then you have to pay tax according to your tax slab. This means that if you buy shares for delivery. hold to less than 1 year time period. So you will give flat 15% short term capital gain tax on your profit.

And if you hold stock for more than 1 year time period, So you will give them long term capital gains tax. Which is NIL, This means that if you hold stock for more than 1 year time period, So you get discounts from Capital Gain Tax. This is also an advantage of being a long term investor.

  • As we know, Rahul is a long-term investor who is investing for 2 to 3 years. Therefore, Rahul will not give capital gains tax on his profits.

On the other hand, Vinit is an intraday trader. Therefore, Vinit will be pay tax on his profits according to his tax slab.
  • Rahul's pay total charges = 128.19 rs
  • Vinit pay total charges = 12.89 Rs
Vinit was an intraday trader. Now Vinit thinks that I am losing today, so why not sell my share good Profit after 2 or 3 days. But Vinit is now selling shares after 3 days. So now this transaction will be called Delivery. In this way, Vinit's total charges will go up from 12.89 Rs and go straight to 128.19 Rs. If Vinit after two-three days 100 Rs earns profits. Still, he has to pay charge 128.19 rupees. because The investment of Vinit is for less than 1 year time period. So Vinit will also give 15% short-term capital gains tax on its profits. Here is Vinit's profit 100 Rs, And all tax 143.13 Rs.

By making a profit of 100 rupees, Vinit is getting a loss of 43.13 Rs. When trading, you have to take care of all these things.

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share market trading charges explained in detail share market trading charges explained in detail Reviewed by Yogesh Dhawan on May 18, 2019 Rating: 5

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