1. If you are a trader, then you might have to pay several charges that are being charged by your stock broker.
  2. These charges are known as the Depository Participant (DP) charges, and they are not mentioned in the contract.
  3. With this blog, we will be understanding the concept of DP charges.

An overview of the depository participant charges:

  • Before we get into the details of the DP charges, let us first understand what a Depository Participant means.
  • A depository is an entity that is holding securities of an investor with the help of stockbrokers or agents.
  • These stockbrokers or agents are known as “Depository Participants.”
  • The securities that you own, like shares, debentures, government securities, mutual funds, bonds, etc., are held by your respective depositories in an electronic format.

What are the DP charges?

  • The DP will levy the charges upon all the sales of share transactions in your Demat account.
  • DP charges are flat transaction fees regardless of the quantity sold by you.
  • Let us take an example and assume that your stockbroker will charge DP charges of RS. 10 flat for your transaction. Then you will need to pay RS. 10 on the sale of 100 shares and even the same RS. 10 if you sell 1000 or 2000 shares.
  • These charges are not present in your contract note and, hence, you cannot view them.

Who will levy the DP charges?

The DP charges on the transaction are levied by the depositories as well as the depository participant.

Remember the following for the levying of the DP charges:

IndexDepository
NiftyNational Securities Depository Limited (NSDL)
BSECentral Depository Securities Limited (CDSL)

A depository participant will act as the mediator between the depository and the investor.

The examples of the depository participants are as follows:

The examples of DP (depository participants)

A DP will usually levy four types of charges or fees for a Demat account transaction.

They are as follows:

The examples of DP (depository participants)

Why do the Depository Participants levy DP charges?

  • The stockbroker has to be a depository participant to provide Demat account services to the individuals.
  • The stockbrokers will have to pay membership fees as well as the advanced transaction charges to the depositories such as the NSDL and the CDSL.
  • The stockbrokers will pass those charges on to us in the form of Demat account opening fees and annual maintenance charges (AMC).

Depository-wise DP charges:

It is very important to know the two depositories that will levy the DP charges and their roles as well.

They are as follows:

Depository-wise DP charges

National Securities Depository Limited (NSDL):

  • The NSE, as well as the Unit Trust of India (UTI), will jointly promote the NSDL as a depository.
  • The following will perform various functions for NSDL:
National Securities Depository Limited (NSDL)

Must Know: How to open a Demat Account?

  • To seamlessly provide services to its customers as well as the clearing corporations, DPs should be members of NSDL.
  • You can use several NSDL services, but only with the help of DPs.
  • However, you will have to first open a depository account with the DP.
  • The NSDL will charge INR 17.50 (INR 13+4.50) per sale transaction per day as your DP charges.

Central Depository Services Limited (CDSL):

  • The CDSL is promoted by the BSE as well as all the other public sector banks.
  • The DPs will serve as an intermediary between the CDSL and you.
  • The CDSL will manage as well as record the balances in your Demat account using DPs.
  • All the account statement provisions from the DPs at regular intervals with information on your transactions and securities held are available to you.
  • The CDSL will charge INR 18.50 (INR 13+5.50) per sell transaction per day as your DP charges.

Can you avoid these DP charges?

The answer to this question is yes.

You can definitely avoid the DP charges in the following ways:

Can you avoid these DP charges

Intraday trading:

  1. Intraday trading will involve the purchase and sale of transactions within the same trading day.
  2. There are no DP charges for intraday trading because the shares are not deposited in your Demat account.
  3. The main purpose of intraday trading is to make short-term gains, as here there is no concept of investment.

BTST trading:

  • BTST stands for “buy today and sell tomorrow.”
  • BTST trading will involve the selling of the stocks before they are deposited in your Demat account to simply take advantage of the market volatility.
  • The shares were bought previously and they are not yet delivered to your account.

Also Check: Can a Person Have Multiple Demat Accounts in India

Futures and Options:

  1. In the derivative market, i.e., futures and options, there are no Depository Participants charges involved.
Conclusion:

We hope that the above-mentioned blog with respect to the DP charges has given you an idea about the same.

Frequently Asked Questions (FAQs)

Answer: A depository is an institution that will function as a bank for the securities and will also hold them in an electronic format on behalf of the investor.
Answer: The main depositories in India are the NSDL as well as the CDSL.
Answer: They are the stock brokerage firms that will provide investors with investment and depository services.
Answer: Yes, the DP charges can be avoided.
Answer: Yes, the DP charges are tax deductible and you can claim the same while calculating STCG (short-term capital gain) because this is an expense incurred in connection with the transfer.
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Author

Prashant Raut is a successful professional stock market trader. He is an expert in understanding and analyzing technical charts. With his 8 years of experience and expertise, he delivers webinars on stock market concepts. He also bags the ‘Golden Book of World Record’ for having the highest number of people attending his webinar on share trading.