Calculating the Transaction costs while Buying or Selling shares or stocks is very hectic especially for those who are trading heavily. Almost all the share trading or brokerage firm like Sharekhan, Karvy, ICICI DIrect, HDFC Security, Angel Broking, Kotak Securities etc. All these share brokerage firm is charging certain transaction cost on each and every buy or sell of share/stocks.
What is Transaction Cost in Share Trading ?
Transaction cost in share trading is the amount borne by the buyer or seller while selling or buying shares. Transaction cost involves lot other thing like commission paid to brokerage firm, Securities Transaction Tax(STT),Service Tax, stamp duty and registration charges paid to the government. Making profits out of the market is back-linked to complex trading cost.
[box type=”info” align=”aligncenter” ]Transaction cost= Brokerage+ STT+ Stamp duty+ service tax+ Other charges.[/box]
Brokerage: This is charged by the broker as his commissions.Brokerage charges may vary from firm to firm.
Calculation of Brokerage
Suppose you have account with any brokerage firm which charges 0.3% commission on the transaction then in such cases
Share Value = Rs 400
Quantity Purchased = 100
Total value of share trading = Rs 40,000
Brokerage Commission@0.3% = Rs 120
Selling 100 shares @ price Rs 450 per share = Rs 45000
Brokerage Commission@0.3% = Rs 135
Total Brokerage Paid = Rs 120+ Rs 135 = Rs 255
Total Profit = Rs 5000-Rs 255 = Rs 4745
SEBI Turnover fees
This is the exchange trading amount paid to SEBI through investor via their brokers for trading on their platforms. There is annual fees of Rs 50,000 which is charged by SEBI from broker.
Stamp Duty on Share Trading
This is the charges paid on behalf of share trading through brokerage firm. Stamp duty is levied on value of share which varies from one state to other. Nominally 0.002%
Service Tax on Share Trading
As usual Service Tax are being levied on the total value of transaction. Currently Service Tax at 15% is levied on total value of transaction.
Securities Transaction Tax (STT)
Securities transaction tax is the direct tax levied on the gains from securities traded in except commodities and currency. Currently 0.10%.
Calculation of STT
There are two type of STT which are levied on purchase or sale of share like when trading done on the same day ,it is called Intraday Trading and holding overnight, then you take delivery of the shares and hence, this is called Delivery Trading
Suppose a trader buys 100 shares worth Rs.2000 at Rs.20 each and sells it at Rs.30 each. If the trader sells the shares the same day then intraday STT rate will apply which is 0.025%.So,
[box type=”info” align=”aligncenter” ]STT = 0.025*30*100 = Rs.75 Note : STT rate for intra day is 0.025%[/box]
|S.No.||Type of Taxable Securities||Type of Transaction||Applicable STT|
|1||Delivery-based equity shares||Purchase||0.125% on total value|
|2||Equity oriented mutual funds||Redemption of units||0.25%|
|3||Equity shares, equity mutual fund units and intra-day traded shares||Purchase||Nil|
|4||Derivative- sale of option||Sale||0.017%|
|5||Derivative sale of futures||Sale||0.017%|
Calculation of Charges on Share Trading
|Brokerage ( 0.3%)||120|
|Stamped duty/charges on delivery: 0.01%||4|
|Securities transaction tax on delivery: 0.1% on turnover||40|
|Turnover tax/transaction charges: 0.0035% on turnover||1.40|
|Service tax: 14% on brokerage||16.80|
|Service tax: 14% on turn over/transaction charges||0.196|
|Swachh Bharat Cess: 0.50 % on brokerage and turn over/transaction charges||0.60|
|Krishi Kalyan Cess: 0.50 % on brokerage and turn over/transaction charges||0.60|
|Total charges (including brokerage)||183.59|
|Total payable (in case of purchases)||40,183.59|
|Total receivable (in case of sale)||39,816.41|
Note : Brokerage pays a lot of impact on profitability. Choose Brokerage or share trading firm after comparing their brokerage charges only.