Investing in the stock market enables you to enjoy financial growth in the long run. But stock market investments entail a few charges that you cannot avoid. These charges ultimately impact your returns, making it crucial for you to understand them.
DP charges are among the most common fees you may encounter while investing or trading in the stock market. These are transaction charges levied whenever you sell shares.
DP charges are not mentioned in the stock contract, making it critical to know before you start trading or investing.
Depository participant or DP charges mean transaction charges levied when you invest in stocks through a broker. These charges apply to every sale transaction of your shareholdings.
When you buy any stock, it is credited to your Demat account after a trading day. Your Demat account is maintained by either of the two depositories in India: National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CSDL).
When you sell your shareholdings, the broker requests these depositories to release them. When the depository releases your share to execute the sale process, a fixed amount is deducted from your account. This amount is known as DP charges.
Unlike brokerage charges, DP charges are fixed. For instance, if you sell 30 stocks of Company X, you will be levied a charge of, say, ₹13.5 plus 18% GST. However, if you sell another 30 stocks of the same company, the DP charge will only be levied once.
However, if you sell 30 stocks of Company X and 30 stocks of Company Y, you will be levied DP charges of ₹13.5 plus 18% GST twice.
DP (Depository Participant) charges in India are levied by the depository participants for the services they provide in maintaining and facilitating transactions in dematerialized securities. The calculation of DP charges can vary depending on the depository participant and the specific services offered. However, the general method to calculate DP charges is as follows:
Identify the type of transaction: Determine whether it is a purchase (buying) or sale (selling) transaction of securities.
Determine the transaction value: For purchase transactions, it is the total value of securities being bought. For sale transactions, it is the total value of securities being sold.
Check the DP charge structure: DP charges may be based on a flat fee or a percentage of the transaction value. Verify the fee structure provided by your depository participant.
Calculate the DP charges: Multiply the transaction value by the applicable DP charge rate (either flat fee or percentage).
Example:
Suppose you have sold securities with a transaction value of ₹1,00,000 and the DP charges are 0.02% of the transaction value.
DP charges = Transaction value * DP charge rate
DP charges = ₹1,00,000 * 0.02% = ₹200
In this example, the DP charges for the sale transaction would be ₹200.
It's important to note that DP charges can vary across different depository participants. Hence, it's advisable to refer to the specific fee structure provided by your chosen DP for accurate calculations.
Various Depository Participants (DPs) provide investors with stockbroking and Demat accounting services. However, to be a DP, an entity must be a member of a depository (CSDL or NSDL) and registered with SEBI.
These depositories charge these entities a membership fee and advanced transaction charge in lieu of the membership. To compensate for this cost, the DPs charge individual investors with DP charges like:
Demat Account Opening Fee
Annual Maintenance Charges (AMC)
DP charges vary depending on the depository (CSDL and NSDL) and the Depository Participants (DP). The following are the charges these depositories levy:
National Securities Depositories Limited (NSDL)
The National Securities Depositories Ltd. (NSDL) is a depository of the National Stock Exchange (NSE) and is promoted by the United Trust of India (UTI).
Various depository participants are members of NSDL performing stock brokerage services to investors. The DP charges levied by NSDL per transaction per day is ₹13 plus ₹4.50, i.e., ₹17.50.
Central Securities Depositories Ltd (CSDL)
The depository for the Bombay Stock Exchange (BSE) is Central Securities Depositories Ltd. (CSDL), which is promoted by various public sector banks (PSBs). With the help of associated DPs, CSDL manages and records the stockholdings in your Demat account.
The CSDL levies DP charges of ₹13 plus ₹5.50, i.e., ₹18.50 on every sale transaction per day.
In light of the recent changes made by SEBI regarding DP charges, you must know the following:
As DP charges are directly accounted for on the ledger, they do not feature on the stock contract.
As Indian stock exchanges have shifted to the T+1 settlement norm, the Buy Today Sell Tomorrow Trading (BTST) will now attract DP charges. This is because the stocks will now be credited to your account within one trading day.
Since 2019, SEBI has done away with the DP charges of ₹5.5 plus GST on the redemption of mutual funds.
The DP charges are levied by depositories (NSDL or CDSL) on every sale transaction of shares you make.
The depository for the Bombay Stock Exchange (BSE) is the Central Securities Depositories Ltd. (CSDL). It charges ₹18.50 on every transaction you execute in a day.
The National Securities Depositories Ltd. (NSDL) is the depository associated with the National Stock Exchange. If you sell stock in NSE, it will charge you ₹17.50 per transaction per day.
The stocks and securities get delivered to your account within a trading (T+1) day. So, you can eliminate DP charges by avoiding the delivery of stocks in your Demat account. For instance, you can participate in intraday or futures trading, as these do not attract DP charges.
Yes, DP charges are compulsory. However, they are not applicable for Futures & Options trading.
DP charges are levied by the Central Depository Services Limited and Depository Participant when the shares are sold from the Demat account.
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