DP Charges

What is DP Charges and when are they applied?

The Depository Participant Charges (DP Charges) is a type of fees, that is charged by the Depository Participants (DP) to the investors at sell time. These charges will be applicable for transactions, where securities are debited from the Demat Account of the investor.

The structure and the amount of the fees to be paid is largely decided by the Stock Broker. Most of the Brokers charge a fixed amount for every script that is debited, irrespective of the quantity of the securities.

This means that if an investor sells 100 shares of Company A and 10,000 shares of company B in one day, then a fixed amount will be charged for the debit of the two securities with different ISINs (Company A and Company B). The quantity and value of the debited securities does not matter.

Why are DP charges collected from investors?

All investors who wish to invest in financial securities, need to open a Demat Account with a Depository. However, this cannot be done directly, and the investors need to contact a Depository Participant (DP) to open the account. The DPs are usually the Stock Brokers with whom the investors open their Trading + Demat Account. Therefore the DPs act as an agent of the Depositories, to provide Demat related services to the investors.

The Depositories charge various types of fees to the DPs like Registration fees, Annual charges etc. One of these fees is Transaction charges, which is payable by the DP, when the customers of the DP are selling shares. This is charged by the Depository Organization, in return for providing easy transfer of securities in Dematerialized format. So, the DPs collect this fees from the investors, when the investor sells securities from the Demat Account.

How much DP charges are applicable?

An interesting thing to note is that the Stock Brokers might not charge the exact same fees that they have to pay to the Depository. This means that some Brokers might charge INR 0 DP charges from their customers. Whereas other DPs might charge an amount higher than the amount that the DP needs to pay.

The Brokers who claim to have zero stock DP charges, might instead have a higher Brokerage or high Annual Maintenance Charges (AMC). Therefore, the investors should compare the fees and charges prevalent in the industry, before opening an account with any Broker.

How much do Brokers charge?

Most Brokers charge a fixed amount for every security that is debited (Irrespective of number of shares or transaction value). That means, if an investor sells shares of 5 different companies in a day, then the fixed charges will be applied 5 times. Most Brokers do not charge any fees for credit of shares.

In addition, the fees is also payable for off-market transactions that are done through Delivery Instruction Slip (DIS) or when gifting shares to relatives. (Refer: Step by step guide to gift stocks to relatives using CDSL.)

Of course, some Brokers might have a different fees structure. Therefore, the investors should check the exact fees charged by their Brokers.

When are DP charges not applicable?

Here are some cases when these charges do not have to be paid:

  • Intraday trading of securities (Since no shares are debited from the Demat Account)
  • Buying / Selling of a Futures contract (No securities held in Demat Account)
  • Buying / Selling of an Options contract (No securities held in Demat Account)
  • Buy Today Sell Tomorrow (BTST) trades in some cases (Depends on the Settlement process of the Broker and the Settlement Cycle)

Payment of DP charge

In stock markets, the obligation to pay the DP Charges will fall directly on the investors. When selling on the exchange, the traders do not have to submit these charges separately. The Brokers automatically collect this fees from the cash balance in the Trading Account of their clients .

Most Brokers do not show these charges in the Contract Note sent at the end of the trade day. Instead, these charges will show up in the Cash/Ledger statement generated by the Broker.

Taxes on DP charges

Since the DP charges are technically a payment that is made in return for a service (ability to deliver shares from the Demat Account), GST is applicable on these charges. The current rate of GST charged is 18% on the fees amount. The tax is collected along with the fees, by the Broker.

Therefore, if the Broker charges INR 10 for the debit of securities, then the net amount payable by the investor will be INR 11.8.

Calculation of DP Charges

Let us look at a sample trade to understand how the fees will be calculated for the trader.
Example
Suppose that a trader already holds 200 shares of Company A and does the below-mentioned transactions:

Buys 500 shares of Company B at 10:30 AM
Sells 100 shares of Company B at 12:00 PM
Sells 50 shares of Company B on next day
5 days later, Sells 20 shares of Company B and 1 share of Company A

So, in these transactions, the trader ended up doing:

  • An intraday trade for 100 shares of B
  • BTST trade for 50 shares of B
  • Took delivery of 350 shares of B and sold 20 from the Demat Account
  • Sold 1 share of Company A from Demat Account

Computation of DP charges

Let us assume the Broker charges INR 10 as DP charges, at sell time. The fees is calculated separately, depending on the sell orders.

Intraday trade (100 shares of B)
    Applicable charges: INR 0

Sell time – BTST (50 shares of B)
    Option 1: Settlement by Earmarking of Securities,
      Applicable charges: INR 10 + GST (18%) = INR 11.8
    Option 2: Settlement by Early Payin (EPI),
      Applicable charges: INR 0

Sell time – Delivery (20 shares of B)
    Applicable charges: INR 10 + GST (18%) = INR 11.8

Sell time – Delivery (1 share of A)
    Applicable charges: INR 10 + GST (18%) = INR 11.8

Disclaimer

  • This page is for education purpose only
  • Some information could be outdated / inaccurate
  • Investors should always consult with certified advisors and experts before taking final decision
  • Some images and screenshots on this page might not be owned by FinLib

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