Every trade you make in India carries a set of charges on top of the price you pay or receive. Some go to your broker, some to the government, some to the exchange and the regulator. Each one looks tiny on its own. Together, on an active trader's hundreds of trades a year, they can add up to a large sum, sometimes larger than the trader's profit.
This guide explains what each charge is and how it works. It does not give rates, because they are revised from time to time by the government, the exchanges, SEBI and your broker. Always check the current figures on your broker's charges page or brokerage calculator, and on the exchange and SEBI websites.
The charges on a typical trade
| Charge | Who sets it | What it is charged on |
|---|---|---|
| Brokerage | Your broker | Each executed order, as a flat fee or a percentage, depending on the plan |
| Securities Transaction Tax (STT) | Central government | The value traded; which side (buy, sell or both) depends on the segment |
| Exchange transaction charges | NSE / BSE / MCX | The turnover (value traded), or the premium for options |
| SEBI turnover fee | SEBI, the market regulator | The turnover, as a very small fee |
| Stamp duty | Government (collected centrally) | The buy side of a trade |
| GST | Government | The service charges: brokerage, exchange charges and the SEBI fee (not on STT or stamp duty) |
| Depository (DP) charges | Depository and your broker | Each time delivery shares leave your demat account when you sell |
Commodity trades on MCX have a similar list, with Commodity Transaction Tax (CTT) in place of STT on many contracts. Currency trades have their own set. Check the segment you trade.
Each charge in plain English
- Brokerage is your broker's fee for executing the order. Many brokers charge nothing or very little for delivery (buy and hold) equity trades and a flat amount per executed order for intraday, futures and options. Some charge a percentage of value. Note that a single order filled in several parts is usually one order for brokerage, but check your broker's rules.
- STT is a tax on buying and selling securities on the exchange. It applies to shares, futures and options at different rates and on different sides. For options it is usually charged on the premium when you sell. Its rates have been changed in several budgets, so do not rely on any old figure you read.
- Exchange transaction charges are what the exchange charges for using its trading system. They are calculated on turnover and differ between segments and exchanges.
- SEBI turnover fee funds the regulator. It is very small per trade.
- Stamp duty is a tax on the transfer of securities. It is charged once, on the buyer.
- GST is charged on services, so it applies to brokerage, exchange charges and the SEBI fee, not to taxes such as STT and stamp duty.
- DP charges are a fixed fee per stock per day when shares are debited from your demat account after a delivery sale, regardless of the number of shares.
A special case: options held to expiry
When you sell an option before expiry, STT is charged on the premium. When an in-the-money option is held to expiry and settled by the exchange, the tax is calculated in a different way, on the settlement value, and the amount can be noticeably larger than selling it a few minutes before the close would have cost. Stock options that are in the money at expiry are also physically settled (you must take or give delivery of the shares), which brings delivery charges and a large margin requirement. Many traders close in-the-money options before expiry for these reasons. Check the current rules with your broker and on NSE; see also physical settlement of stock options.
Hidden costs: the spread and slippage
Two costs never appear on your contract note but are paid on every trade:
- The bid-ask spread. The best price someone will pay (bid) is always below the best price someone will sell at (ask). Buying at the ask and selling at the bid loses the difference even if the price does not move. In liquid NIFTY options near the money the spread is small; in far strikes or thinly traded stock options it can be several percent of the premium. See bid-ask spread and liquidity.
- Slippage. Market orders and stop-loss orders in fast markets fill at worse prices than the screen showed.
A worked example: what costs do to an intraday straddle
The intraday short straddle is a good illustration, because it involves four orders (sell call, sell put, buy back call, buy back put) to capture a fairly small move. Here is the live NIFTY straddle:
Suppose a trader sells the straddle for ₹290 and buys it back for ₹270, a gain of ₹20 per unit. Take a lot of 75 units as a made-up round figure for this example (check the current lot size on NSE). The gross profit is ₹1,500. Now suppose all the charges on the four orders, plus a rupee or two of spread on each leg, come to several hundred rupees in total; the exact amount depends on your broker and current rates, and a brokerage calculator will show it. A large slice of the ₹1,500 is gone. On a day the straddle falls only ₹8, costs may take most or all of the gain. When the stop-loss is hit, costs are added to the loss.
The lesson is not that the trade is bad, but that costs must be part of the plan. A strategy that shows a small average profit on a chart can lose money in real life once charges, spread and slippage are included. The backtester fills sells at the bid and buys at the ask to capture the spread; add your broker's charges on top. The paper trading page does not include charges, so note them in your journal.
How to read a contract note
After every trading day your broker sends a contract note, a legal record of each trade. It lists the trades, prices and quantities, and then each charge separately: brokerage, exchange charges, STT, SEBI fee, stamp duty and GST, followed by the net amount payable or receivable. It is worth reading a few carefully:
- Check that every trade is yours and the quantities are right.
- Add up the charges as a percentage of your gross profit or loss for the day.
- Keep contract notes; you will need them, or your broker's yearly profit and loss statement, for your tax return. See tax on F&O income.
Ways traders keep costs under control
- Trade less often. Fewer, better-planned trades pay fewer charges.
- Use limit orders where practical, to avoid paying the full spread and slippage.
- Prefer liquid contracts: near-the-money strikes of index options have the tightest spreads.
- Set targets well above costs. A target that is only a few times the round-trip cost leaves little room.
- Compare brokers' charge plans for the way you actually trade (delivery, intraday, options), using their published calculators.
Common mistakes
- Looking only at brokerage. "Zero brokerage" does not mean zero cost: taxes and exchange charges still apply.
- Using old rates. STT and other charges have changed in recent years. Always check the current figures.
- Ignoring the spread in illiquid options, where it can be the largest cost of all.
- Forgetting costs in backtests and paper trading, which makes a method look better than it is.