Brokerage Impact on Profits Earned From Intraday Trading

As the term suggests, intraday trading is the trading done on stocks in a given day, within specified working hours. As all intraday traders, you are not looking to buy shares or trade doing the day for the purpose of investment. Instead, you conduct intraday trading transactions to earn an income. Intraday traders carefully observe the movement of stocks on charts and employ their understanding to take advantage of these movements and make a profit.

However, there are various costs involved in buying and selling shares in a day. Some of these expenses that you may have to incur while executing intraday trading include:

  • Transaction Costs
  • Stamp Duty
  • SEBI Regulatory Fee
  • Securities Transaction Tax (STT)
  • Brokerage and GST on Brokerage

Stamp Duty: Depending on your location, you may need to pay a certain fee to your state government as stamp duty. Every region has a specified amount mentioned as stamp duty towards intraday trading. For example, the stamp duty in Maharashtra may be different than that in Andhra Pradesh.

SEBI Regulatory Fee: Being the market regulator in India, the Securities Exchange Board of India (SEBI) safeguards your interests as an investor in the stock market. All Indian Stock Exchanges charge the SEBI Regulatory Fee. This expense is used to cover the costs that SEBI has to sustain to perform its functions. Currently, the charges are 0.0002% of the (number of shares * share price) or 0.0002% for every equity transaction. Regardless of whether it is a delivery or intraday transaction, this amount remains fixed.

Securities Transaction Tax (STT): The Securities Transaction Tax is levied by the Government of India on the trading of equities. Based on the Security Contracts (Regulation) Act, 1956, the current tax collected is 0.025% of (number of shares sold * share price) or 0.025% of the transaction value valid on one equity sold during an intraday transaction.

Brokerage Expenses: Every broker charges a trader for the services that the brokerage firm offers to him. Depending on the broker, brokerage fees are usually 0.03-0.05% of transaction value or a flat fee.

However, there are two types of brokers. These are full-service and discount brokers.

A full-service broker offers higher brokerage rates but offers enhanced and a comprehensive bouquet of services. They also provide leading research, information and critical tips on the stock market and sectors to invest.

A discount broker, on the other hand, provides no-frills access to trading and hence has low brokerage rates for lesser services.

Typically, an intraday trader may pay approximately Rs. 200-Rs. 250 as brokerage fees, depending on the broker’s fees

Although you can profit from intraday trading, the brokerage that you pay your broker can eat away into your profits. To avoid this, you can open a trading account with a reputed full-service broker such as Kotak Securities, as it offers a Free Intraday Trading option. Signing up for Free Intraday Trading involves an annual fee of a fixed amount, while all other brokerage charges for intraday transactions are eliminated.