Trading Cost
Many people overlook the actual trading cost, they fail to understand the overall concept of stock trading and most of the time, they make loss altough there portfolio reflects a profit.
Trading cost can be calcuated with the following formulae:
Trading cost = Brokerage + STT + Stamp duty + other charges
Brokerage Rate
There are many brokers charging different rates of brokerage. For example, ICICI Direct charging @.75% and HDFC charging @ .5% of trading amount.
Sale Transaction Tax
STT or Sale transaction tax is imposed on the sale/purchase of securities by retail/institutional investors and is charged on total turnover (cost of each share * no. of shares). For delivery of shares it is charged at .125%. For intraday selling of shares, it is charged @.025%. For buying, there is no tax for intra day trades. Currently government is under consideration to remove/reduce STT because since it was introduced in 2004, the cost of transaction of trades has drastically increased.
Stamp Duty
Stamp duty is also charged on total turnover. For delivery of shares it is charged at .01% and for intra day it is charged at .002%.
Transaction Charges
For trading of shares at NSE, it is charged @ 0.0035% while for BSE, it is charged @ 0.0034%.
Turnover Charges
For equity transaction, this remains NIL but for derivative transactions, it is charged @ 0.0002% of total turnover.
Service Tax
Service tax is charged on all the components, viz Brokerage, STT, Stamp Duty, Transaction Charges and Turnover charges