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DP Charges: Meaning & Types

8 Mins 07 Jun 2023 0 COMMENT
DP Charges

 

Before discussing DP Charges, let's define DP, or a Depository Participant. A depository is a company that keeps securities that investors have purchased through stockbrokers or other agencies. The term "Depository Participants" refers to these stockbrokers. Your securities as an investor, such as shares, debentures, government securities, bonds, mutual fund units, etc., are stored electronically by the corresponding depositories.

What are DP charges?

Depository Participant (DP) charges are levied to the charges you pay for investing or trading through a broker.  To understand what are dp charges full form, we have to first make a note that every sale of shares that occurs in your Demat Account is subject to fees from the DP. No matter how many items are sold, DP Charges refer to flat transaction fees. You would pay Rs. 10 on the sale of 100 shares and Rs. 10 on the sale of 1,000 shares, for instance, if your stockbroker sets the DP charge at INR 10. These fees are not listed in the contract notes; therefore, you are unable to view them.

What are stock DP charges?

The stock dp charges are assessed by both the depository participant and the depositories, as was already noted. The depository for equities listed on the National Stock Exchange's (NSE) Nifty is the National Securities Depository Limited (NSDL), whereas the Bombay Stock Exchange's (BSE) depository is the Central Depository Securities Limited (CDSL). You should be aware of the following four charges for a Demat Account transaction:

  • Fees for Account Opening
  • Annual Maintenance Charges
  • Custodian Fee
  • Transaction Fee

How much DP charges are levied?

DP charges vary based on the depository. As DP Charges, the National Securities Depository Limited (NSDL) levies a daily fee of Rs. 17.50 (Rs. 13 + 4.50) for each sell transaction. For each sell transaction, Central Depository Services Limited charges INR 18.50 (Rs. 13 + 5.50) every day.

Why do Depository Participants Levy DP Charges?

The brokerage must be a depository participant to offer Demat Account services to private individuals. The stockbroker must, however, pay membership dues and the advanced transaction fee to the depositories, particularly the NSDL and CDSL, to become a depository participant. To cover these costs, the stockbroker will pass them off as Demat Account Opening Fee and Annual Maintenance Charges (AMC).

Why are DP charges levied?

In order to offer customers a Demat account, a stockbroker must enrol as a depository participant. Additionally, they must pay millions in membership dues to NDSL or CDSL, in addition to numerous other fixed expenses and upfront prepaid transaction fees. By charging an additional fee to cover these costs, the brokers pass these costs forward to their clients.

Types of DP charges

You must understand the two depositories and their functions in addition to the entire form of DP Charges and their significance. Here is a brief rundown of them:

National Securities Depository Limited (NSDL)

The NSDL is promoted as a repository by the NSE and the Unit Trust of India (UTI). For NSDL, numerous tasks are carried out by Depository Participants, Clearing Corporations, Share Transfer Agents, and other organizations. Business partners of NSDL are another name for the Depository Participants.

DPs must be NSDL members in order to offer services to clients and clearing firms. The different NSDL services are accessible, but only through DPs. Open a depository account with the DP first, though.

As DP Charges, the NSDL levies a daily fee of Rs. 17.50 (Rs. 13 + 4.50) for each sell transaction.

Central Depository Services India Limited (CDSL)

The BSE and other public sector banks both support CDSL. The DPs act as a bridge between you and the CDSL. Using DPs, the CDSL keeps track of and manages the balances in your account. You get access to account statement provisions from DPs at regular periods that include details of your transactions and securities owned.

Each sell transaction costs CDSL INR 18.50 (Rs. 13 + 5.50) every day.

Conclusion

Irrespective of the number of shares sold, DP charges are constant. Regardless, it is essential to know why DP charges are levied. It will help you gauge how much your profit margin will be influenced when you sell your shares. In case you have any doubts regarding DP charges, you can contact your stock broker. 

FAQs on DP Charges

Can I avoid DP charges?

DP charges are only levied on delivery trades. If you make an intraday trade, or a BTST trade or a futures trade, you can avoid DP charges. These charges aid the participants in running their operations, as it cover the hefty sum paid to the depository.

What are DP charges in tax?

When shares are sold, the depository and the depository participant levy a charge, additionally, 18% GST is applicable per day and stock irrespective of the quantity sold.

Why are DP charges high?

Since these charges are a major source of income for the depositor and its participants, DP charges are high.

Are DP charges the same for all brokers?

The two elements of DP charges are the depository fee and the brokerage fee; this brokerage fee differs from one broker to another.