How To Calculate Transaction costs in Buying or Selling shares or stocks?

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

Read : How Do I Know if I Should Buy, Sell or Hold Stocks ?

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%

Read : What is the Effect of RBI Policy Rates On Stock Market/Sensex ?

Calculation of Charges on Share Trading

Particulars Amount (Rs.)
Total turnover 40,000
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.

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