Costs are the only part of your returns that is completely certain in advance. You cannot control whether a stock rises. You can control exactly how much friction you pay to own it — and over a lifetime that difference is enormous.
The deductions, one by one
- Brokerage — what your broker charges. Most Indian discount brokers charge nothing on delivery trades and a flat ₹20 (or 0.03%, whichever is lower) per intraday order.
- STT (Securities Transaction Tax) — a government levy collected at the exchange. 0.1% on both buy and sell for delivery; 0.025% on the sell side only for intraday. Unavoidable, and often larger than brokerage.
- Exchange transaction charges — around 0.00297% of turnover, paid to NSE.
- SEBI turnover fee — ₹10 per crore. Trivial, but present.
- Stamp duty — a state levy on the buy side: 0.015% for delivery, 0.003% for intraday.
- GST — 18%, but only on brokerage and transaction charges, not on STT.
- DP charges — a flat fee (typically ₹13–20) charged by the depository participant each time shares leave your demat account. Charged per stock per day, not per share — which is why selling 500 shares in five separate lots costs five times as much as selling them at once.
Capital gains tax in India
Tax on listed equity depends entirely on one thing: how long you held it. The dividing line is twelve months.
| Holding period | Classification | Tax rate | Notes |
|---|---|---|---|
| Up to 12 months | Short-term (STCG) | 20% | Flat rate on listed equity where STT was paid — not your income slab |
| More than 12 months | Long-term (LTCG) | 12.5% | First ₹1.25 lakh of LTCG in a financial year is exempt |
| Dividends | Income from other sources | Your slab rate | TDS applies above ₹10,000 from one company in a year |
| Intraday | Speculative business income | Your slab rate | Treated as business income, not capital gains |
The compounding cost of over-trading
Assume a ₹5 lakh account. Trade the whole account twice a month and you turn over ₹1.2 crore a year. At roughly 0.25% round-trip friction on delivery trades, that is about ₹30,000 a year — 6% of the account, gone, before any question of skill arises. Your strategy has to beat the market by 6% just to draw level with doing nothing.
You have ₹1.4 lakh of long-term capital gains this financial year. How much LTCG tax do you owe?
Hall ka rate ₹50,000 bola tha, bill aaya ₹62,000 — service charge, GST, cleaning, generator. Trading mein bhi wahi hota hai: brokerage, STT, exchange fee, stamp duty, GST. Ek baar khareed-bech mein chhota sa hi lagta hai, par saal mein 50 baar karoge toh yeh hi aapka profit kha jaata hai.
- Zero brokerage does not mean zero cost — STT, stamp duty, GST and DP charges remain.
- DP charges are flat per sale, so they punish small and fragmented positions hardest.
- Twelve months is the line: 20% short-term versus 12.5% long-term with a ₹1.25 lakh exemption.
- Intraday profits are business income taxed at your slab, not capital gains.
- Costs are the one variable you fully control. Over-trading is the most reliable way to lose money slowly.
Mark it done to track your progress through the curriculum.
Common questions
Short, direct answers to what people ask about this topic.
- what is the LTCG tax rate on shares in India
- Long-term capital gains on listed equity shares and equity mutual funds are taxed at 12.5%, and only on gains above a ₹1,25,000 exemption in a financial year. Long-term means the shares were held for more than one year. The tax applies to the gain, not the whole sale value.
- what is the STCG tax rate on shares
- Short-term capital gains on listed equity shares and equity mutual funds — those sold within one year of buying — are taxed at 20%. This flat rate applies regardless of your income slab, so a quick profit on equity is taxed more heavily than a long-term one.
- what is STT in stock market
- STT (Securities Transaction Tax) is a small tax the government levies on trades in listed securities, collected automatically at the time of the transaction. On delivery-based equity it is charged at 0.1% of the trade value on both the buy and the sell side, and different rates apply to intraday and derivatives. You cannot avoid it — it is deducted whether you make a profit or a loss.
- does zero brokerage mean there are no charges
- No — even when brokerage on a delivery trade is zero, you still pay STT, exchange transaction charges, GST on those charges, stamp duty and depository (DP) charges on selling. “Zero brokerage” refers only to the broker’s own fee; the statutory and exchange costs remain, which is why a trade always costs a little more than the share price alone.
- what are DP charges
- DP (Depository Participant) charges are a small flat fee levied when shares are debited from your demat account — that is, when you sell delivery holdings — charged per company per day regardless of quantity. They are collected by the depository and your broker, and they apply on the sell side even with a zero-brokerage broker.