There are many charges involved while trading in the markets.

There are many charges involved while trading in the markets. Some of the most common ones which people are aware of are Broking charges and Securities Transaction Tax. In this video, we will understand different charges which are involved while trading in shares. Let us understand this with an example. Suppose there are 2 traders Ajay and Vishal. Ajay does trading in delivery and invests for a long term i.e. for 2-3 years. On the other hand Vishal is an intraday trader. Both of them have their trading and demat accounts in the same broking company named C. The broking charge for C is 0.04% for intraday trading and 0.30% for delivery trading. Also let us assume that both Ajay and Vishal have put in a total of Rs 10,000 in the shares of Tata Motors in NSE and both of them live in Mumbai. Now let us look at different charges and taxes paid by them for buying and selling the shares. Brokerage Charges-For Ajay (delivery trader) the brokerage charge will be 0.30% of the total amount which happens to be Rs 10000 in this case.

Now let us assume that he buys today and sells at a future date. Let’s assume that he sells his shares for Rs 11,000. Thus the brokerage charge for him would be = Rs. (10,000/0.3% + 11, 000/0.3%) = Rs 63. Hence the total brokerage to be paid by him would be Rs 30 (Buying) + Rs 33 (Selling)i.e Rs 63. For Vishal who happens to be an intraday trader, let us assume that he buys shares worth Rs. 10,000 and sells it for Rs. 10,200 on the same day. The brokerage to be paid by him would be Rs(10000+10200)/0.04% = Rs 8.08.Brokerage charges are charged at the time of buying and selling. Apart from brokerage there are many other charges involved in trading in the markets. We’ll have a look at it now.-Securities Transaction Tax (STT) – This is the next major charge apart from the brokerage charge.

STT is levied on trade transactions of securities that are listed on registered stock exchanges in India. Any time you buy or sell securities such as shares, bonds, debentures or MF which are listed on a stock exchanges, you are liable to pay STT.For delivery trading, STT is charged on both sides i.e on buying and selling. On the other hand, for intraday, STT is levied only when one sells the stock. For delivery trading, the STT is around 0.1% of the total transaction in case of both buying and selling. Whereas for intraday the STT charge is around 0.025% on the sell side. Service Tax: Service Tax is another charge that is levied. It is equal to 15% of your brokerage charge. So, in our example both Ajay (delivery trader) and Vishal (intraday trader) will pay 15% of their respective brokerage as service tax. Stamp duty: This is a fee which is charged by the state Government. Different states have different stamp duties. Some states may have the same stamp duty fees for intraday and delivery or they may charge different stamp duty fees. For example in case of Maharashtra the stamp duty is .002% for intraday and .01% for delivery whereas in case of Delhi it is .0025% in case of intraday and .0025% in case of delivery. Transaction charges:This is levied by stock exchanges. Nse charges a transaction fee of .00325% of the total traded value whereas BSE charges a fee of .00275% of the totaltraded value. SEBI Turnover charges – This is usually .0002% of the total amount for both intraday and delivery trading and on both sides of transaction i.e buying and selling. Depository Participant Charges- This is usually between Rs 10 to Rs 35 depending on your broker and this is only for delivery trading.

Hence, only Ajay will be charged. Capital Gains Tax- In India the long term capital gains tax (which is for more than a year) on saleof securities where profit exceeds Rs 1 lakh, the tax rate is 10% whereas the short term capital gains tax is 15%. We have seen that there are numerous charges involved in trading, be it intraday or delivery based. So, when you calculate your profit be sure that you take into consideration these charges and then deduce your real profit.