.gif)
.webp)
.svg)
Key Highlights
- A depository participant is an intermediary between investors and depositories, which offers investors a platform to open a Demat account.
- Depository participant charges are costs applicable on all 'sell' transactions of your Demat account and are levied by depository participants on investors and traders.
- Depository participants have to pay numerous fixed costs and an advanced prepaid transaction charge to depository institutions in India.
- They pass on the depository participant charges to their customers as an additional fee to reclaim their expenses.
If you invest in the stock market, you should know about the various costs associated with market transactions. One such cost is known as depository participant charges. But before you find out about the meaning of this type of cost, you should know what a depository participant means.A depository participant is an intermediary between investors and depository institutions in India. It could be a brokerage house or a bank, and offers investors a platform to open a Demat account. A Demat account is where you store your financial securities like stocks, mutual funds, bonds, etc. in an electronic form.In this blog, you will read about the meaning of depository participant charges, why are such charged levied, who levies such fees and how does it work.
What are Depository Participant Charges?
Depository participant charges are costs applicable on all the 'sell' transactions in the stock market and are levied by the depository participant on investors and traders.Whenever you sell a security from your Demat account, you have to pay DP charges. It is a flat transaction fee and does not take into effect the quantity of the stock that you are selling.For example, if the DP charge for selling a stock is ₹25, you will have to pay that amount even if you sell 10 or 50 shares of the particular company. The total quantity of shares sold does not affect the DP charges.Depository participant charges are exclusive of the brokerage fee and are not reflected in contract notes. DP charges are also the only revenue source for depositories and their participants for offering services, such as corporate action handling, pledging and unpledging of shares, etc.
Who Levies DP Charges?
There are two depository institutions in India: National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).These depositories and the depository participants impose DP charges.If the stock is part of the Bombay Stock Exchange, then CDSL levies the DP charges and if the stock is a part of the National Stock Exchange, the NSDL will impose the DP charges. The stock exchanges can use any of these two depositories for settlement and trading.
Why are DP Charges Levied?
Since stock brokers cannot enable opening of a Demat account directly, they need to become depository participants with depositories. This involves numerous fixed costs and DPs also have to pay an advanced prepaid transaction charge to the two depositories to the tune of several lakh.Therefore, these brokers pass on depository participant charges to their customers as an additional fee to reclaim their expenses. It is also the only source of revenue for such depository participants who otherwise charge a negligible fee from customers.
How Much are the Depository Participant Charges?
The DP charges vary based on the depository:
- The Central Depository Services (India) Limited (CDSL) levies a charge of ₹ 35.5 per company in one day.
- The National Securities Depository Limited (NSDL) charges ₹17.50 (₹13 + ₹4.50) per company in one day.
For example, if your depository is CDSL and you sell shares worth ₹10,000 in a single day, you will have to pay an additional DP charge of ₹ 35.5 asDP charges, additional to the brokerage fee.
How do DP Charges Work?
For instance, you sell 50 stocks of Company A at 9 a.m., followed by another 50 stocks of the same company at 2 p.m. In such a situation, the total DP charges would amount to ₹13.5, with an additional 18 per cent GST.On the other hand, if you sell 50 stocks of Company A and 50 stocks of Company B on the same day, the DP charges would be calculated differently. The DP charges will be ₹13.5 for the transaction related to Company A and an additional of ₹13.5 for the transaction related to Company B, along with an35.5per cent GST. This is because the sell order involves multiple stocks.
DP Charges: Things to Remember
DP charges is an essential cost if you invest or trade in the stock market and such a cost generally remains the same irrespective of the number of shares sold. It is recommended to always check the charges beforehand and figure out how these costs ultimately affect your profit margins.In addition to the depository participant charges, you must also make note of the brokerage fee as every broker has its own specific charges. Also Read: What is Demat Account? Meaning, Documents & Benefits
FAQS - FREQUENTLY ASKED QUESTIONS
What are depository participant charges?
Depository participant charges are costs applicable on all 'sell' transactions in the stock market and are levied by the depository participant on investors and traders.
What is a depository participant?
A depository participant is an intermediary between investors and depositories, which offers investors a platform to open a Demat account and provides services related to the holding and trading of securities in electronic form.
What are the annual maintenance charges levied by DPs?
Annual maintenance charges are recurring fees charged annually for maintaining your Demat account.
Are DP charges mandatory?
Yes, DP charges are generally mandatory for maintaining a Demat account. The specific charges and their calculation depends on the respective depository participant.
What is DP charges full form?
DP charges translates to depository participant.
Can I switch a depository participant to reduce DP charges?
Yes, you can transfer your Demat account to another depository participant. There may be charges involved for the transfer process.
How can I compare DP charges?
You can compare DP charges by reviewing the fee structures of different depository participants and reading customer testimonials.
What are the depository institutions in India?
There are two depository institutions in India: National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).
What is a Demat account?
A Demat account is where you store your financial securities like stocks, mutual funds, bonds, etc. in an electronic form.
Pease give an example of DP charges.
If you sell 10 stocks of Company A followed by another 10 stocks of the same company, the total DP charges would amount to ₹13.5, with an additional 18 per cent GST.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
