You are on your favorite trading app (like IIFL), and you’re watching happily as the stock you bought some time ago has risen to reach your target profitable price. You have been patiently waiting for the day when you will sell the stocks and you see a fee, other than the brokerage, is being levied on your sell transaction. You go through your contract documents and do not see the reason behind an extra fee involved with selling stock.
To know the inception behind these charges, it is important to cover the basics of a Depository and its participants.
What is a Depository and its Participants?
As an investor, you trade in stocks of various companies. A platform, like the IIFL Markets app, is where you can buy and sell them at your convenience. However, there is a place where these shares are deposited while trading. The place is called a Depository.
In India, there are two depositories: National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Limited (CDSL). When you open Demat Account with any stockbroker, it operates under these two depositories.
Furthermore, every stockbroker works as an agent of the two depositories and assists customers in carrying out investment transactions. These stockbrokers, like IIFL, are called DPs, or Depository Participants.
What are DP charges
The depositories offer numerous services such as corporate action handling, pledging and unpledging of shares, etc., and work in synergy with depository participants (stockbrokers). In exchange, they charge a small fee from the investors known as DP charges that are levied by the depositories as well the depository participant.
Since brokerage charges are detailed in the account opening form but not the depository fee, it can become confusing if you don’t know what DP charges are.
DP Charges are levied on all the “sell” transactions through your Demat App. The charges are a flat transaction fee and do not take into effect the quantity you are selling of a particular stock.
How much are DP Charges?
DP charges vary based on the depository. The Central Central Depository Services (India) Limited (CDSL) DP charges are Rs 18.50 (Rs 13 + 5.50) per company, per day. Comparatively, the National Securities Depository Ltd. (NSDL) charges Rs 17.50 (Rs 13 + 4.50) per company, per day as DP charges.
For example, if your depository is CDSL, and you are trying to sell shares worth Rs 10,000 in full in a single day, you will have to pay an additional Rs 18.50 (Rs 13 + 5.50) as DP charges, excluding the brokerage fee at the time of executing the sell order.
Who levies DP charges?
The depositories (CDSL and NSDL) and the Depository Participants (such as IIFL) impose the DP Charges. If the stock is part of the Bombay Stock Exchange, then Depository Securities Limited (CSDL) levies the DP charges. However, if the stock is a part of the NIFTY or the National Stock Exchange, the National Securities Depository Limited (NSDL) imposes the DP charges. Although, exchanges can use any of these two depositories for settlement and trading.
The depository participant, such as IIFL, works as a mediator between these depositories and the investors and charges them an additional fee to be paid to the depositories.
Why are DP charges levied?
Stockbrokers cannot offer Demat account opening and investing services to customers until they become Depository participants. Moreover, becoming a depository participant accompanies numerous fixed costs, which can be in lakhs of rupees. Furthermore, the stockbrokers also have to pay an advanced prepaid transaction charge to the two depositories.
Stockbrokers usually charge zero Demat account opening fee and annual maintenance charges. Hence, these DP charges are extended to the investors as an additional fee. It is also the only source of revenue for such depository participants who otherwise charge a negligible fee to their customers.
How much DP charges are levied?
The two depositories charge the following DP Charges:
Demat transaction charges for CSDL: Rs. 13 plus Rs. 5.50
Demat transaction charges for NSDL: Rs. 13 plus Rs. 4.50
Apart from the above charges, depository participants charge an additional fee which may vary depending on the stockbrokers. The various charges levied by IIFL under its three investor-oriented plans are as follows:
| Plan Name | Investor Plan (Online Plus) | Premium Plan (Dedicated RM ) | Super Trader Plan (Pro Traders) |
|---|---|---|---|
| Account Opening Charges (one-time) | ₹ 250 | ₹ 250 | ₹ 250 |
| First Year Annual Maintenance | ₹ 0 | ₹ 0 | ₹ 0 |
| Annual Maintenance (from 2nd year) | ₹ 250 | ₹ 250 | ₹ 250 |
| Others Charges | |||
| DP charge Credit | ₹ 0 | ₹ 0 | ₹ 0 |
| DP charge Debit | ₹ 25 | ₹ 50 | ₹ 10 |
| Delayed payment charge (p.a.) | 18% | 18% | 15% |
| System & Risk square off | ₹ 100 | ₹ 100 | ₹ 0 |
| Call & Trade | ₹ 0 | ₹ 0 | ₹ 0 |
| Pledge & Unpledged charges/ ISIN (customer-initiated) | ₹ 10 | ₹ 10 | ₹ 10 |
| Re-pledge and Release charges/ ISIN (collaterals) | ₹ 1 | ₹ 1 | ₹ 1 |
| Pledge Invocation Charges | ₹ 15 | ₹ 15 | ₹ 15 |
| Pledge Closure | ₹ 0 | ₹ 0 | ₹ 0 |
| Demat/ Remat Charges | ₹ 15 | ₹ 15 | ₹ 15 |
Conclusion
DP charges always remain the same, irrespective of the number of shares sold. You can always contact your stockbroker to gain clarity on the DP charges. It is always wise that you know the meaning of DP charges beforehand and then goes ahead with selling your shares. If you are planning to invest in the stock market, you must consider DP charges and how they can influence your profit margin in the end.
If you are still without a Demat account and want to open one, you can visit the IIFL website or download IIFL Markets App from the app store. The Demat account opening is simple, quick, and free of cost.
