Apart from the brokerage, there are a few more charges associated to share trading. Read this post to know five such important charges.
Planning to start trading shares? With the Indian economy consistently improving, now can be a great time to enter the markets. But one of the most important things that every trader should know about share trading is the cost associated with it. While most of the new traders have some idea about the brokerage charged by the broker, majority of them do not know anything about the other charges.
Read this list of 5 important charges involved in share trading to be a savvy trader-
- Brokerage Fee
While most of you might already know this, this list cannot be complete without talking about brokerage. This is the commission charged by the broker. Irrespective of whether you are buying or selling shares or whether you are buying/selling shares in profit or loss, you have to pay the brokerage. The brokerage can vary between brokers and is a major consideration when selecting a broker.
- SEBI Turnover Fees
The turnover fee of SEBI is included in the fee that you pay to the trading exchange through your broker. For debt securities, it is 0.00005% of the price at which you buy or sell shares and 0.0015% of the price you buy or sell shares of securities apart from the debt securities.
- Service Tax
The service tax is a government tax which was introduced under the Finance Act of 1994. It is an indirect tax and nothing different than the service tax you pay on almost everything from eating out, entertainment, to travelling. Your broker is required to pay 15% tax (14% Service Tax+0.50% Krishi Kalyan Cess+0.50% Swachh Bharat Cess) on the brokerage service which is ultimately paid by the customers.
- STT (Securities Transaction Tax)
The STT is payable on the profits generated by buying and selling securities, except currencies and commodities. It is a direct tax collected by the Central Government. It ranges from 0.001% of the transaction volume to 0.125% depending on whether a trader is buying or selling and the type of security.
- Stamp Duty
Another one among the various demat account charges is the stamp duty. Just like you pay stamp duty when you buy a property, you also need to pay stamp duty when you buy shares. It is levied on the total volume of transferred shares. The stamp duty in India varies between states. For instance, in Maharashtra, the stamp duty on a delivery trade is 0.01%, and the same on non-delivery trade is 0.002%.
No trader should ignore these charges as they play an integral role in share trading. While you might believe that you’ve earned profits in a trade, the actual profits would only be what is left after deducting these charges. If the profit is small, these charges can easily eat up a good part of what you’ve earned. Keep them in mind to avoid any rude surprises in future.