Different costs associated with stock exchange transactions

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oi-Roshni

By Roshni Agarwal

Published: Tuesday, December 10, 2013, 10:59 [IST]

In a bid to simplify the procedure for opening the demat account, required to maintain securities in electronic form, Securities and Exchange Board of India (SEBI) recently replaced the earlier agreement document with a more simple term sheet and also waived stamp duty charges on opening of the demat account. But the waiver is applicable only on demat account opening and you still have to pay stamp duty for different transactions in the stock market.

So, did you know in all what are the different costs associated with trading i.e. buying and selling of shares.

1. Brokerage Fee: The brokerage house or the intermediary facilitating buying and selling of shares charge brokerage fee or commission as a percentage of the total trade value. Depending on his trading volume, the customer can negotiate with the brokerage house in respect of the brokerage fee being charged.

Different brokers across the industry are charging different amounts as commission for transaction in securities. However, some of the brokers in the recent past have begun to charge a flat fee regardless of the trading volume.

2. Stamp duty: Buying and selling of shares attracts stamp duty i.e. currently charged @ 0.01% of the overall trade value.

3. Service tax: This tax charged by the government for particular services is levied on the
brokerage fee and the service tax rate currently stands @ 12.36%.

4. Securities transaction tax or STT: Dealing in shares entail levy of STT which is determined
by the government from time to time. Usually, change in the STT rate is notified in the annual
budget. The rate of STT is dependent on the kind of security as well as the nature of the
transaction i.e. buy or sell. At present, delivery-based share purchase transactions attract STT
@ 0.1% on the transaction value i.e. (number of shares multiplied with the price per share). Sale
of these shares results in the levy of STT @ 0.1% of the transaction value.

5. Transaction charges: Few of the brokerage firms also charge transaction charges which
is a small amount usually charged on the basis of the exchange on which the transaction is
effected.

6. Sebi turnover tax: This is yet another tax i.e. charged @ 0.0001% on the total trade value.

All the cost items or charges for transaction in shares are thereon added or deducted depending on the trade transaction i.e. buy or sell for determining final trade value.

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