What are Depository Participant (DP) charges

Depository Participant (DP) charges are mandatory fees on sell transactions in your Demat account, levied by CDSL and include a small fee by Groww for processing the sale.
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What are Depository Participant (DP) charges
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3 mins
14 November 2024

DP (Depository Participant) charges are mandatory fees incurred on every stock sell transaction through your Demat account. These charges are not applicable when you buy stocks. Levied by the depository (such as CDSL) and including an additional fee from Groww for processing the transaction, DP charges account for the cost of holding and transferring your securities in electronic form.

What do DP charges mean?

DP charges, short for Depository Participant charges, are fees applied when you sell shares from your Demat account. These charges cover the cost of processing transactions via a broker or depository participant. In India, Demat accounts are maintained by depositories like the National Securities Depository Limited (NSDL) and the Central Depository Services (India) Limited (CDSL). When you sell a stock, the broker asks these depositories to release your shares, initiating the sale. Once the shares are released and available for trading, a set fee, shared between the depository (CDSL/NSDL) and your broker, is deducted from your account as DP charges.

Why do depository participants levy DP charges?

To provide Demat account services to individuals, the stockbroker must be a depository participant. And, to become a depository participant, however, the stockbroker must pay membership fees and the advanced transaction charge to the depositories, namely the NSDL and CDSL. The stockbroker will pass them as Demat account opening fee and annual maintenance charges (AMC) to compensate for these expenses. Depository-wise DP charges are levied to compensate for these expenses.

 

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Who levies DP charges?

In India, DP charges are imposed by both depositories, such as the National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL), and depository participants (DPs) like brokerage firms. When you sell shares on the National Stock Exchange (NSE), a portion of the DP charges goes to NSDL; for sales on the Bombay Stock Exchange (BSE), part of the charges is directed to CDSL. Acting as intermediaries, depository participants link investors with these depositories to facilitate transactions and manage Demat accounts.

How much do you pay as DP charges?

The depository participant charges vary among different participants, and the charges imposed by Bajaj Financial Securities Limited (BFSL) are outlined below.

BFSL levies DP charges at Rs. 30 or 0.0002% of the transaction value, whichever is higher, plus applicable taxes. It is important to note that DP charges usually do not appear on your contract note.

Why are DP charges important?

Understanding DP charges is crucial for several reasons:

1. Cost management

DP charges are important for effective cost management in financial transactions. Investors need to consider these charges as part of the overall cost of trading and holding securities. Understanding DP charges allows investors to budget more accurately and making informed decisions about their investment strategy.

2. Tax implications

DP charges may have tax implications, and investors should be aware of how these charges are treated for tax purposes. Some DP charges are subject to applicable taxes and understanding the tax implications ensures that investors can accurately assess their tax liabilities. Being informed about the tax aspects of DP charges can help investors in tax planning and compliance.

3. Transparency

DP charges contribute to the transparency of the overall investment process. By knowing the charges associated with the services provided by the depository participant, investors can make well-informed choices and understand the true cost of maintaining and trading securities. Transparency in DP charges also fosters trust between investors and financial intermediaries, as it ensures clarity in financial transactions.

Conclusion

Investors must consider these charges when budgeting and making informed decisions about their investment strategy. The transparency provided by comprehending DP charges contributes to the overall transparency of the investment process, fostering trust between investors and financial intermediaries. While DP charges are compulsory and cannot be avoided, investors can minimize them by selecting depository participants with lower fees. In essence, a thorough understanding of DP charges empowers investors to navigate the securities market more effectively, ensuring they are well-informed and prepared for the associated costs and implications.

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Broking services offered by Bajaj Financial Securities Limited (BFSL) | Registered Office: Bajaj Auto Limited Complex , Mumbai –Pune Road Akurdi Pune 411035 | Corporate Office: Bajaj Financial Securities Ltd,1st Floor, Mantri IT Park, Tower B, Unit No 9 & 10, Viman Nagar, Pune, Maharashtra 411014| CIN: U67120PN2010PLC136026| SEBI Registration No.: INZ000218931 | BSE Cash/F&O (Member ID: 6706) | DP registration No : IN-DP-418-2019 | CDSL DP No.: 12088600 | NSDL DP No. IN304300 | AMFI Registration No.: ARN – 163403|

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Frequently asked questions

What are DP charges?

DP charges, or Depository Participant charges, are fees applied when you sell shares from your Demat account through a broker. These charges help cover the cost of managing and processing the transaction. When you buy a stock, it is typically credited to your Demat account within two days, but DP charges are only incurred when you sell.

Who levies and collects DP charges?

In India, DP charges are levied and collected by the Depository Participant (DP), which acts as the link between investors and the central depositories, such as National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL). These charges support the transaction process managed by the depository.

How much DP charges will I have to pay for selling stocks?

The amount of DP charges you will have to pay for selling stocks depends on the depository participant you are trading with. DP charges are levied once per scrip despite multiple stocks being sold during the same transaction.

For example, BFSL levies DP charges at Rs. 30 or 0.0002% of the transaction value, whichever is higher, plus applicable taxes. It’s important to note that DP charges usually do not appear on your contract note. Additionally, BFSL has specific charges for account opening, annual maintenance, pledge/ unpledge/ closure/ invocation, physical CMR/DIS requests, dematerialisation requests, and re-materialisation requests. Click here to learn more about the fees and charges levied by BFSL for the Demat account services.

How can I avoid paying DP charges?

DP charges are compulsory and cannot be avoided. However, you can minimise the amount of DP charges you pay by choosing a depository participant that charges lower fees.

Are DP charges compulsory?

Yes, DP charges are compulsory for all shares sell transactions from your Demat account. These fees are mandated by the depository, such as CDSL, and are applied each time you initiate a sale.

Who collects DP charges?

NSDL/CDSL does not charge investors directly but charges its Depository Participants (DPs), who in turn charge the investors.

What is a depository?

A depository is an organisation that holds securities in electronic form on behalf of investors.

Who are depository participants?

A depository participant (DP) is a registered intermediary between the depository and investors in India. DPs act as a link between investors and depositories, maintain investor-level accounts for securities, and facilitate the trading process by connecting investors to the depositories in India.

What is DP charges in tax?

DP (Depository Participant) charges are not a tax, but a transaction fee charged when you sell shares from your Demat account. These charges are not deducted as tax by the government, but you can include them as a cost while calculating capital gains, which may reduce your taxable gain.

How do I remove DP charges?

DP charges are mandatory and cannot be removed as long as you're selling shares from your Demat account through a broker like Groww, Zerodha, etc. However, you can reduce the impact by:

  • Minimising the number of sell transactions
  • Using brokers that offer lower DP charges
  • Opting for intra-day or futures & options trading, where DP charges don’t apply (note: these have different risks)
Are DP charges monthly?

No, DP charges are not monthly fees. They are levied per sell transaction, regardless of the quantity of shares sold. So, if you sell stocks multiple times in a month, you'll be charged DP fees for each sell transaction.

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