Brokerage Charges & Taxes on share trading

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Share trading or stock trading is the process of buying and selling shares. The process takes place through a broker. This transaction incurs some charges and taxes upon them which we are going to discuss today.

Stock brokers charge a fee for the transaction they execute on behalf of you and that fee is termed brokerage. Brokerage is to be paid for both when you buy shares as well as when you sell share

Types of trade:
Intraday trading- When the process of buying and selling a share takes place on the same day it is referred to as intraday trading. For example, if you buy 10 shares of Tata Motors and sell them on the same day, that’s intraday trading.

Delivery trade: When you buy a share on a day and sell it after that day then it’s a delivery trade. For example, you buy 100 shares of Tata Motor and sell it after 3 days then its delivery trade.

Understanding the difference between both is necessary as there are different charges on different types of trades.

Types of brokers: Full-Service brokers – These are traditional brokers that offer Full-Service trades in stocks, currency, commodities, mutual funds etc. They also provide investment advisory and usually charge a high brokerage due to their personalised service. Example – Kotak securities

General Brokerage- 0.03% – 0.60%

Discount broker- These brokers only execute a trade on behalf of. They don’t provide any kind of investment advice. Brokers such as Zerodha and Upstox are examples of discount brokers. Discount brokers are affordable as compared to Full-service brokers.

General Brokerage- ₹10-₹20 per executed trade also most of the discount brokers provide free delivery trades.

Understanding the difference between both is necessary as there are different charges on different types of trades.

Other charges: Apart from brokerage, there are some other charges levied on share trading. Let us understand these different charges and their rate: 1] Security Transaction Tax (STT): After brokerage, this is the highest charged tax on a share transaction. For a delivery trade, the STT is charged for both the buy and sell of the transaction. The tax is 0.1% of the total transaction price. ( On each side of trading) Unlike Delivery trades for intraday trading ( Futures’ and Options), the tax is charged only when you sell the shares. The rate is 0.025% of the total transaction (while selling) For Equity futures, the rate is 0.1% (sell-side), while for Equity Options the rate is 0.05% (sell-side on premium)

2] Stamp duty charges: Stamp duty is now charged uniformly all across India. These rates are only applied to the buy side of the transaction and not both. Here below is a list of rates of stamp duty for different transaction
Earlier before 1st July 2020, All states had individual stamp duty rates.

3]Transaction Charge : The transaction charge is charged by a stock exchange such as NSE/BSE. This charge is charged for both the sides buy as well as sell. The charge is equal for both deliveries as well as intraday trades.

The national stock exchange (NSE) charges 0.00325% of the total turnover of the transaction charge (both Equity and Delivery Trade)

Bombay stock exchange (BSE) charges a 0.003% transaction fee on the total turnover of the transaction ( both Equity and delivery trade)

The national stock exchange (NSE) charges 0.0019% for futures trading and 0.05% of the total turnover for Options trading.

Bombay stock exchange (BSE) doesn’t charge anything for derivatives trading.

4] SEBI Turnover Charges – The securities and exchange board of India (SEBI), and is the market regulator. SEBI sets out the rules for stock trading In India and regulates the Stock Market.

SEBI Turnover fees are ₹10 per transaction for the sides (Buy & Sell), the rate is the same for all Equity Intraday, Delivery, Futures and Options.

5] Depository Participant (DP) : There are two stock depositories in India: National Securities Depository Limited (NSDL) Central Depository Services Limited (CDSL)

The depositories don’t charge traders or investors. They charge Depository Participant which in your case is your broking firm. But as your broker acts as a link between you and the Depository, the broker charges you the fees.

For example, while trading with your broker, the DP charge is equal to ₹13.5+GST per scrip (irrespective of quantity), on the day, and is debited from the trading account, when stocks are sold. This is charged by the depository and depository participant.

6] Goods & Service Taxes (GST): The GST rate for stock trading is 18% of the total brokerage and transaction charges.

7] Capital Gain Taxes: Capital Gain tax is one of the most important charges to understand for traders and investors.

There are two types of Capital Gain taxes in India-
1] Long-term capital gain tax.
When you buy a share and then sell it after one year of buying. Then 10% of the profit is charged as the Capital gain tax.

2] Short-term capital gain tax.
When you buy a share and then sell it before one year of buying. Then a flat 15% is charged on profit as the Capital gain tax.

3] This Capital gain tax is only charged for profit over ₹1 lakh as per the union budget.

4] For intraday traders the Capital gain tax is charged as per the tax slab. If you are in the highest tax slab, you pay a tax of 30% on your profit.

Conclusion: Stock trading is one of the fields with the highest earning possibilities and surely you can’t have all of that yourself. So you have to share some with the government and other parties who play a role in your trading. The above article covered all the tax and brokerage charges related to stock trading. Hope you find this article helpful. To download and calculate your brokerage- Click here

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