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Brokerage charges, fees, and Taxes on trading and investing| STT, SEBI charges, GST

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Brokerage charges on trading and Investing

In this article we are going to discuss the total charges that a trader needs to pay while performing a trade. There are two parts to this - one is the brokerage charged by the broker and the other is charges and taxes. Exchange Transaction Charges, STT or Securities Transaction Tax, GST, Stamp Duty, and SEBI Charges are part of other charges levied on trading and investing across segments.

Total brokerage on trading and investing is the sum of brokerage charges, Exchange Transaction charges, STT, Stamp Duty, SEBI charges, and GST (Brokerage + Exchange transaction charges).

1. Brokerage charges

Brokerage is the fee charged by the broker for trading. 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

There are some brokers who charge you absolutely no brokerage with their fixed monthly trading plans. The plan charges a fixed monthly fee from traders and allows brokerage-free trading. other charges will be still applicable to your trade.

2. SEBI charges

SEBI or Securities and Exchange Board of India charges for buy and sell transactions of securities in India. It is the same across all brokers be it discount brokers or full-service brokers.

It is the fixed charge of Rs 10/crore or 0.0001% of equity delivery, Intraday, derivatives, and currency F&O.

Check out the SEBI charges for trading on BSE, NSE, and MCX;

  • Equity, Equity Derivatives, and Currency: Rs 10 per crore or 0.0001%
  • Commodity Futures Agri: Rs 1/crore + GST Non-Agri: Rs 10/crore
  • Commodity Options - Rs 10/crore

3. Exchange Transaction charges

It comprises of two charges turnover charges and 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 exchange. Clearing charges are the charges which broker pays to professional clearing members to clear the trade. The broker charges both of them 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, and Rs 5000 per Crore for Equity options on premium value.
  • Bombay Stock Exchange (BSE) charges Rs 300 per crore for Equity trades, Rs 50 per crore for Equity Futures, Rs 2500 per Crore for Equity options on premium value.
  • Professional Clearing Member charges (PCM) is optional, but if the broker is charging then they have to give it to PCM.

4. Securities Transaction Tax or STT

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

  • Equity Delivery - Rs 10,000 per Crore or 0.1% per volume on buy and sell both sides.
  • Equity Intraday - Rs 2,500 per Crore or 0.025% per volume on sell-side only and is valued at the actual traded price.
  • Equity Futures - Rs 1,000 per Crore or 0.01% per volume on sell side only and is valued at the actual traded price.
  • Equity Options - Rs 5,000 per Crore or 0.05% on sell side only on premium value.
  • Commodity Futures - 0.01% on sell side (Non-Agri)
  • Commodity Options - 0.05% on sell side

STT on the commodity trading is called Commodity Transaction Tax (CTT). 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.

5. Stamp Duty

Stamp Duty is the State Government tax levied on instruments and documentation. With the recent changes by SEBI, unified stamp duty will be charged across the country. Stamp duty is charged per contract note and based on traded volume. The new stamp duty would be charged only on the buy side of the transaction. Stamp duty will be charged on Off-market transactions as well. Read Stamp Duty Rates

6. Good and Service Tax or GST

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

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

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User Reviews

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2. Arun Gandhi Dec 30 2016 04:56:54 PM 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 "delivery handling charges" it permissible

They are charging the additional Brokerage in the Ledger ...and not on Contract Note 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 using some other word " extra Charges "
1. Kunal Apr 19 2016 08:23:35 PM Reply
why Zerodha is charging high transaction charges for NSE F&O ?