Investment is a tool that is used strategically in today’s world. To develop a structured plan, all the variables involved in making an investment decision should be considered by you as an investor.

When you trade in the stock market, there are various costs involved, which cumulatively form the final price of the share.

To understand the cost structure of the trade activity better, it is imperative to understand the concept of intraday and delivery-based trading.

• Intraday trading is when the buying and selling of shares take place within a trading day.
• Delivery-based trading is done with the intent of buying and holding the shares.

Types of costs

The various costs associated when investing in stock markets are:

Brokerage: Brokerage is charged on the turnover value of the transaction. It is taken on both transaction sides, i.e., when buying and selling. Brokerage charges in the stock market are applicable in both forms of trading, i.e., intraday and delivery. However, it varies with the service provider. It is higher in delivery transactions than in intraday.

GST: The rate of GST for share trading is 18% on cumulative brokerage and transaction charges.  GST on the stock market is a mandatory tax levied by the government.

Stamp duty for stock trading: Stamp duty in the stock market is levied on all transactions. With effect from July 1, 2021, a uniform stamp duty rate is charged on a stock market transaction. Stamp duty for intraday transactions is 0.003% and for delivery transactions 0.015%.

Transaction charges: These charges are levied by the respective exchanges. It is charged on the turnover of the transaction, and it remains the same for both intraday and delivery transactions. The charges are NSE 0.00325% and BSE 0.00275% of the turnover.

SEBI turnover charges: The Securities and Exchange Board of India (SEBI) is the regulator of the Indian stock market. SEBI charges a fee of .0002% on the turnover of the transactions. These charges are the same for both intraday and delivery-based activities.

What is Security Transaction Tax (STT)?

STT is a TDS levied on the purchase and sale of securities listed on a recognised stock exchange. STT in the stock market is the biggest charge after brokerage. It is applicable on both sides (buy and sell) of the transactions.

Delivery transactions STT is at 0.1% of the total transaction amount and for intraday transactions, it is 0.025%.

DP charges (depository participants): These are the fees for the safekeeping of shares by the depositories. In India, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CSDL) as depositories. The facilitator with whom you have your demat account is the depository participant. Depositories charge a fee to depository participants. DP adds the same charges to the trader.

These charges can be seen in the account activity summary of your brokering partner.

Understanding associated costs and planning your investments

Understanding various charges helps you as an investor make better decisions about when to invest in stocks. This, in turn, could affect profitability. Besides these charges, income tax implications should also be considered while actively trading in the stock markets.