Types of Taxes & Charges Applicable on Stock Trading

Stock trading is a great way to build wealth, and the option of online share market trading has made it easier than ever to get into it. However, like all things involving money, one has to pay some taxes and charges when they do stock trading. They are:

  • Brokerage Fees: When you start stock trading, you have to buy the stocks via a stockbroker. For this, you have to pay a certain amount to them, and it’s called brokerage fees. Brokerage fees are usually a percentage of the value of a transaction, such as 0.3%, etc. There are two types of brokerage charges: delivery-based brokerage charges and trade-based brokerage charges. Delivery trading is when you buy stocks intending to sell them some other day, whereas intraday trading is when you sell the stock on the same day. On this, the brokerage charges range from 001%-0.50% of the transaction value. Some brokers charge a flat fee instead of a percentage.
  • Several transaction charges have to be paid while stock trading:
  1. STT or security transaction tax: This tax must be paid while stock trading. It’s the second primary charge that one must pay while stock trading. When doing delivery trading, the STT tends to be around 0.1% of the total transaction amount on either side of the trading. For intraday, it’s 00.25% of the total transaction amount while selling.
  2. Stamp Duty: While stock trading, you have to pay stamp duty on both sides. The stamp duty differs from state to state.
  3. Stock Exchange Charge: While stock trading, you have to pay exchange charges if you do a stock exchange. The national stock exchange charges 0.00325% on the total amount, whereas the Bombay stock exchange charges 0.00275%.
  4. Turnover Charge: While stock trading, you are charged a SEBI turnover charge on both sides of the trade, that is, while buying and selling. The amount charged by SEBI is 0.0002%
  5. Depository participant (DP) Charge: Whenever you place an order to buy a stock, it is kept with a depository first for a bit. For this, a depository charge has to be paid, and it’s called the Depository Participant (DP) Charges. The Depository usually charges a fixed amount ranging from INR 10-35.
  • Capital Gains Tax: Capital Gains tax is a significant tax that one has to pay while stock trading. You have to pay capital gains tax when you sell a stock; the amount you have to pay depends on how long it’s been since you bought the stock. A short-term capital gain tax can also be levied if you purchased the stock within the last 12 months and made profits on it. A 15% tax is charged on that. For long-term capital gain tax, you pay 10%.

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