InvestorQ : What are the charges that are payable in intraday trading. Are all the costs covered in my contract note?
Bhavika Nehru made post

What are the charges that are payable in intraday trading. Are all the costs covered in my contract note?

Bhavika Nehru answered.
3 years ago

The most basic cost is the brokerage charge that you pay to your broker for facilitating your intraday transaction. These brokerage costs on equity intraday trading can range from 4 basis points to 5 basis points in a best case scenario. That translates into 0.04% to 0.05% on an average. That is a break-even impact of nearly Rs. 1 combined on a stock price of Rs.1000. But brokerage is only one of the charges. There are other charges too.

The securities transaction tax (STT) is imposed by the government on the sell side of the intraday transaction. There is no STT on the buy leg if it is an intraday transaction, whereas in delivery there is STT on both sides. The rate of STT is 25 basis points or 0.025% on the sell side value of the transaction. This STT was introduced in 2004 and has continued ever since. STT is imposed on transaction value. Remember, that STT can add up to quite a bit especially when you are trading aggressively on an intraday basis.

Regulatory charges are imposed at 4 levels viz. exchange level, regulator level, state government level and the central government level. At the first level regulatory front there are transaction charges imposed by the stock exchange and the turnover fee imposed by SEBI. For example, the NSE imposes transaction costs at 0.325 basis points on the transaction value. SEBI turnover fee is charged at a flat Rs.15 for every Rs.1 crore worth of transactions. These statutory charges have to be paid on the transaction value.

Effective July 2017, the 15% service tax on brokerage was replaced by the 18% GST. This Goods & Services Tax (GST) of 18% is imposed on value of (brokerage plus transaction charges). Higher the brokerage, higher the GST and that is why keeping brokerage costs low is important for intraday trading. It helps in reducing the overall chain costs. The GST is an indirect tax which is imposed on the broker and passed on to you.

Stamp duty is levied differently by each state. In the case of Maharashtra, the stamp duty is levied at 0.002% of the value of the transaction. Every contract note needs to be stamped as per regulations of the respective state and that is why the stamp duty is charged. All these add up to the total cost of your intraday trading.

All the above costs are mentioned in your contract note. However, there are other costs like DP charges, mailing charges and payment gateway charges which are not reflected in your contract note but will reflect in your ledger.