Top 12 charges charged by your broker which you should know if you are planning to open a Demat or trading account.

Top 12 charges charged by your broker which you should know if you are planning to open a Demat or trading account.

 If you have planned to become a trader in order to earn some profit on a daily, weekly, or monthly basis then the very first thing which you will have to do is open an account with some broking company.

Being new to the market, you should first analyze the charges and taxes which will be imposed on you by the broking companies.

Here is an overview of all such charges and taxes-related terms which will help you analyze and decide the best platform to choose for yourself to begin your journey in the world of the share market.

There are two kinds of brokers in the Indian market-

1) Full-time service brokers:- These kinds of broking companies provide you with the following facilities-

a) A relationship manager who helps in all your trades and executes them.

b) Analysis of stocks and advisory.

c) Full support and guidance. 

Traditional brokers like Motilal Oswal, Share Khan, and bank-based brokers like  HDFC Securities, Kotak securities, etc. are full-service brokers.

2) Discount brokers:-In order to reduce the brokerage charges, a discount broking system was established where the trader does not have to pay unnecessary extra charges.

However, unlike full-time service brokers, you will not get the facility of any relationship manager or any kind of advisory.

You have to do your stock analysis by yourself and execute them as you wish.

Broking companies like Zerodha, Groww, Upstox, etc. are some examples of discount brokers.

A lot of revolutions took place in the field of the broking system so far. Today, a lot of broking companies try to attract customers by promising to provide zero brokerage.

A beginner thinks that zero brokerage means that he will not be charged for using the service provided by the companies but later he/she gets troubled after the actual charges are applied.

This happens because the beginner is not aware of the charging system and the working of the system and hence gets trapped.

Let us discuss briefly what kind of charges and taxes are payable by the trader or investor:-

The charges imposed on a trader can be divided mainly into two categories:-

1)  Internal charges:- All the fees and charges which are levied by your broking company directly or indirectly, fall under this section.

These charges are imposed in order to generate some revenue for the companies.

a)     Account opening charge:  This is an amount that most of the broking companies demand in order to open an account with them.

This is a one-time payable sum which means you have to pay the sum only once while opening the Demat or trading account with the company.

b)     Brokerage:  The charge levied by the broking company or the brokers in order to earn revenue in exchange for managing and providing services is known as brokerage.

It may be applied to every trade you execute.

However, nowadays most companies have relaxed these charges

c)     AMC:  AMC or the annual maintenance charge is the sum that is to be paid on annual basis.

It is demanded either once per year or on a monthly or quarterly basis.

d)    Call and trade charge: This charge is applicable when you place an order by calling your broker. Full-service brokers, as well as discount brokers, also provide facilities for call and trade. However, charges are varied.

e)     Auto square-off charge: If you are an intraday trader then you must have to exit or square off your trade before the closure of the market.

If you fail to do so, the broker will automatically square off or exit your position and will count it as call and trade and may apply the same charge as mentioned in the above point.

f)      Payment gateway charge: When you add funds to your account for trading, some of the companies charge for it too.

However, these are either very nominal charges or free in the case of UPI transactions.

2)  External charges:-  The charges imposed by the government or other regulatory bodies other than the broking company are categorized here as external charges.

a)    Transaction charges:- Every time when transactions are done in order to buy or sell a share, a nominal charge on the sum is levied on the trader by the transaction regulating body.

b)    Securities transaction tax (STT):- This tax is decided and imposed by the government of India according to the STT act.

c)     Demat transaction/DP charges (buy/sell):- The depositories NSDL (National Depository Limited) or CDSL (Central Depository Limited) hold your financial securities and hence charge for their service.

The DP charge is applied over the buy or sell or both sides and ranges about Rs 10- 50 per scrip.

d)    SEBI tax:- SEBI is a regulatory body under the finance ministry of the Government of India and its duty is to protect the interest of the traders and investors.

e)    Stamp duty and GST:-  The document-related charge lies under stamp duty and the GST is again a taxation system of the Government of India.

Conclusion:- The charges applied by the government and other regulatory bodies are almost the same ( excluding the DP charge) at every platform. Therefore while comparing and selecting your broker ensure to check out internal charges first which will help you choose the best that suits your requirements.