What are the Brokerage Charges for Delivery Trading
When you buy and sell stocks in the stock market using your trading account, there is a cost which is the delivery trading charges. Of course, there is brokerage for delivery, which is the fee you pay the broker for execution of the trade. Remember, the broker not only executes the trade for you but also handles the clearing and settlement of the trade which ensures that you get shares when you buy and you get cash when you sell.
Delivery trading brokerage
Delivery trading brokerage is normally used interchangeably with brokerage for delivery. However, it must be remembered that brokerage is just one of the delivery trading charges that you have to pay. Brokerage actually goes to the broker. In addition, you also pay statutory charges like securities transaction tax (STT) on the value of the transaction, Goods & Services Tax or GST on the value of brokerage and additional charges like exchange charges, SEBI turnover fee and stamp duties.
Brokerage for delivery is just the fee paid to the broker for execution of the trade. Your overall delivery trading charges will include the brokerage as well as all other statutory charges like STT, GST, stamp duty, exchange fees and turnover tax. When you calculate the break-even price for your delivery trade, you have to look at this entire gamut of delivery trading charges and not just the brokerage for delivery.
How is brokerage calculated?
Brokerage is normally calculated on the value of the trade which is the number of shares multiplied by the price. But there are various models of calculating brokerage and here are some examples. For equity delivery, the brokerage is normally charged as a fixed percentage of the value of the trade and it is charged on both the buy and sell trade. In case of intraday trades, brokers normally charge brokerage only on one side of the trade and not on the other side, to make intraday more economical for clients.
When it comes to futures, the brokerage is charged at a more concessional rate on the notional value of the contract. In the case of options, the brokerage is normally charged on the premium value of the option rather than on the notional value. The general practice in the case of options is to charge brokerage at a fixed rupee brokerage per lot, which is the model that is commonly used.
Is there something called zero brokerage for delivery? That is being offered by a number of brokers although there is a lot of fine print involved. For example, when brokers offer zero brokerage for delivery, it is normally the delivery trades that have been exempted but intraday trades, futures trades and options trades are subject to brokerage levies. Also, even if the claim is zero brokerage for delivery, there are still statutory charges like the STT, stamp duty, exchange charges and SEBI turnover tax that will continue to be charged as they are based on the turnover and not on brokerage.
Frequently Asked Questions Expand All
Technically, you can also buy and sell one share of any stock you want. So, you can buy share of SAIL if you just have Rs.123 in your trading account. With demat, there is no need for any minimum size of delivery trading. However, it would be advisable to start off with a base capital of at least Rs.100,000 so that you have a choice to select from and also you have holding power.
Delivery trading starts with opening your trading cum demat account and then placing delivery trading orders after the account is activated. It is always advisable to do your own research on stocks before buying these stocks.
In the case of delivery trade, you are charged brokerage on both sides. However, in intraday trades, you can get brokerage only on the buy side, although statutory charges will still apply on both sides. Even in futures and options, you can get single sided brokerage on your trades. Remember, even when brokers claim that it is zero brokerage, there will be some element of cost involved in the trade.