Hi there,

The cost associated with buying and selling shares are very tricky. Ask any relationship
manager of a broking house about the commission they charge and he would readily
come up with this answer- .05% for intra day trades and .50% for delivery. If you try t0
walk away, hell come back with his second offer of .04% for intra day and .40% for
delivery. This can go down even to .01 for intra day and .10% for delivery!
Tip: Although you may finally select a broker, make sure that the brokerage

applied on transactions is in line with the offer he made initially. You need to check the
brokerage applied by your broker periodically.
Brokers charge an amount called Annual maintenance charges from your
account. Check those charges. If they are charging AMC every month, it eats into your
invested fund. The best option is to pay a lumpsum amount while joining and get
exempted from AMC being charged monthly. Generally, Borkers charge a lumpsum of
around Rs 500 750 for a life time.

The effective rate of brokerage, however, is different from the above percentages. Apart
from brokerage there are other related costs which these managers dont talk about.
Before getting further into the topic we need to understand what the terms intra day and
delivery mean. Lets seeIntra day - Intraday Trading, also known as Day Trading means you buy a stock and sell
that position before the end of that days trading session thereby making a profit or loss
for you. A buy position and a sell position of same number of shares of a company All
in one days trading session. Thus, intraday means trading in a day. In intra day trading,
brokerage is low in comparison to the delivery.
Delivery- You do not square off your position in a day session. Instead, you decide to
hold the shares till the next trading session or till 20 years or till your target is reached.
Now lets talk about what those charges are. Since the topic is about brokerage , i have
also mentioned about the brokerages on derivatives transaction.
RATES OF BROKERAGE
The net trading cost is computed as below:
Trading cost = Brokerage + STT + Stamp duty + other charges

Now lets try to separate all the cost componentsBrokerage: It is calculated at the agreed percentage, on the total cost of shares bought
or sold. If you are charged .03% for intraday and .30% on delivery, the basic brokerage
figure would be as followsMarket price of the share x number of shares x .03% (intra day)
Market price of the share x number of shares x .30% (delivery)

Securities transaction tax- It is imposed on the sale/purchase of securities by investors

and is charged on total turnover. It is charged as follows:
Equity
Delivery
Transactions
Purchase:
0.125%
of
Turnover
i.e.
(Number
Sell: 0.125% of Turnover i.e. (Number of Shares * Price)

of

Shares

Price)

Equity

Intra-day

Transactions

Purchase:
Sell: 0.025% of Turnover i.e. (Number of Shares * Price)
Future

NIL

Purchase:
Sell: 0.017% of Turnover i.e. (Number of Lots * Lot Size * Price)
Option

Purchase: NIL at the time of purchase of option. However the purchaser has to pay
0.125% of the Settlement Price i.e. (Number of Lots * Lot Size * Strike Price), in case of
option
exercise
Sell: 0.017% of Premium
Transaction charges: There is a very slight difference in the rate of transaction charges
for NSE and the BSE.
Equity
Delivery
Transactions

Purchase: 0.0035% of turnover in NSE and 0.0034% of Turnover in BSE

Sell: 0.0035% of turnover in NSE and 0.0034% of Turnover in BSE
Equity
Intra-day
Transactions

Purchase: 0.0035% of Turnover in NSE and 0.0034% of Turnover in BSE

Sell: 0.0035% of Turnover in NSE and 0.0034% of Turnover in BSE
Future
Transactions

Purchase: 0.002% of Turnover i.e. (Number of Lots * Lot Size * Price)

Sell: 0.002% of Turnover i.e. (Number of Lots * Lot Size * Price)
Option
Transactions

Purchase:
0.05%
of
Premium
Sell: 0.05% of Premium
SEBI turnover charges: For equity transaction, this remains NIL but for derivative
transactions, it is charged @ 0.0002% of total turnover. The calculation would be as
follows.
Equity
Delivery
Transactions

Purchase:
Sell: NIL
Equity

Purchase:
Sell: NIL
Future

Purchase: 0.0002% of Turnover i.e. (Number of Lots * Lot Size * Price)

Sell: 0.0002% of Turnover i.e. (Number of Lots * Lot Size * Price)
Option
Transactions

Transactions
NIL
Transactions

NIL
Intra-day

Purchase:
0.0002%
of
Sell: 0.0002% of Notional Value in case of exercise or assignment
Stamp Duty

Transactions
NIL
Transactions

Premium

Equity

Delivery

Transactions

Purchase: 0.01% of Turnover. Turnover usually taken in multiple of Rs 5000

Sell: 0.01% of Turnover. Turnover usually taken in multiple of Rs 5000
Equity
Intra-day
Transactions

Purchase: 0.002% of Turnover. Turnover usually taken in multiple of Rs 5000

Sell: 0.002% of Turnover. Turnover usually taken in multiple of Rs 5000
Future
Transactions

Purchase: 0.002% of Turnover. Turnover usually taken in multiple of Rs 5000

Sell: 0.002% of Turnover. Turnover usually taken in multiple of Rs 5000
Option
Transactions

Purchase:
0.002%
of
Premium
Sell: 0.002% of Notional Value in case of exercise or assignment
Service Tax
Service Tax, Surcharge and Education Cess are applicable only on Brokerage. No
Service Tax, Surcharge and Education Cess are not applicable on Securities Transaction
Tax (STT) etc..Service tax is levied at 10.30%.
EXAMPLE:
Now lets assume that you purchased 10 ICICI banks share at Rs 868.00 through NSE.
Assuming that the brokerage charged is .05% for intra day and .50% for delivery, the
total cost of the share (for delivery) would be calculated as follows:
Basic brokerage:
Rs 868 x .50% = Rs 4.34
Security transaction charge = 868 x 10 x 0.125% =Rs 11
Transaction charge = Rs 0.32
SEBI turnover charges = NIL
Stamp duty = Rs 0.87
Service tax = 4.47
Total cost of 10 shares @ 868 = Rs 8740.06
When you buy shares, these figures will appear on your digital contract note sent to you
via mail. Its important to keep a print out of those digital contract notes in a file.
Brokerages are very important costs associated with stocks and you cannot afford to
ignore it. You have to be vigilant on the amount you are paying. Periodic check of your
ledger account is necessary.
The brokerage affects investors in different ways. For infrequent traders, a higher
brokerage would lengthen the amount of time required to break even. If you are a high
volume trader, a large brokerage will eat into their overall return. Now, hope youve
understood the cost structure involved with stock transactions in India.
Have a nice day !