Banner

Costs involved in Equity/ Stock Investing

By REPAKA PAVAN ADITYA

|

Updated on: Jun 20th, 2025

|

4 min read

Investing in stocks can be a rewarding opportunity to grow your wealth over time, offering a way to participate in company success. By purchasing shares, you own a small portion of a company listed on a stock exchange, such as the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE) in India. While this can lead to financial gains, it’s essential to understand the costs involved to make informed decisions. This guide explains the key expenses of equity investing in India.

What is Equity/Stock Investing?

Equity or stock investing involves buying company shares through a stock exchange. You hold a small part of that company when you own a share. The goal is to benefit in two main ways:

  • Capital Gains: If the company performs well, the value of your shares may increase. For example, if you buy a share for ₹100 and sell it later for ₹150, you earn a ₹50 profit.
  • Dividends: Some companies share their profits with shareholders by paying dividends, like small cash rewards. Large, established companies (often called large-cap or blue-chip companies) may pay dividends regularly.

However, buying and selling shares come with certain costs, including fees and taxes. Below is a clear explanation of these costs to help you understand what to expect.

Costs of Investing in Stocks in India

When you buy or sell shares, you’ll encounter various fees and taxes, similar to paying a small fee when you buy something online or at a store. Here’s a list of the main costs involved in stock investing in India, explained simply:

Brokerage Fees

A broker is a person or company that helps you buy and sell shares on the stock market. They charge a fee for their services, which can vary:

Full-Service Brokers: 

These brokers offer extra services, such as advice on which stocks to buy, research, and managing other investments like currency or commodities. Their fees are typically 0.01% to 0.5% of the transaction value. For example, if you buy shares worth ₹1,00,000, you might pay ₹300 (0.3%) as a fee.

Discount Brokers: 

These brokers provide a platform for trading without extra advice. They charge a flat fee, usually ₹0 to ₹20 per trade. Some discount brokers may not charge for delivery trades. Fees are often charged for buying and selling, but some brokers charge only for intraday trade transactions.

Example: If you trade ₹1,00,000 shares with a discount broker charging ₹20 per trade, you pay ₹20 whether you buy or sell.

Securities Transaction Tax (STT)

This is a tax charged by the government on every stock transaction. It applies to both buying and selling for delivery trades (long-term investments) but only to selling for intraday trades (buying and selling on the same day).

Rate: 

Delivery trades: 0.1% of the transaction value on both buy and sell.

Intraday trades: 0.025% on the sell side only.

Example: If you buy ₹1,00,000 worth of shares for delivery, you pay ₹100 (0.1%) STT for purchase and ₹100 for selling, totalling ₹200.

Goods and Services Tax (GST)

GST is a tax added to brokerage and other charges, like transaction fees.

Rate: 18% of the brokerage and other fees.

Example: If your brokerage fee is ₹300, you’ll pay an additional ₹54 (18% of ₹300) as GST.

Depository Participant (DP) Charges:

Your shares are stored electronically in a demat account, managed by depositories like the National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL). The broker or depository participant (DP) charges a fee for this service.

Range: ₹12.5 to ₹25 per transaction (only when selling shares) plus an annual maintenance fee of ₹250 to ₹800.

Example: If you sell shares, you might pay ₹13.5 + GST (around ₹16 total) per transaction with a broker like XYZ.

Exchange Transaction Charges

Stock exchanges (NSE or BSE) charge a small fee to process your trades.

Rate:
NSE: 0.00325% of the transaction value.
BSE: 0.00275% of the transaction value.

Example: For a ₹1,00,000 trade on NSE, you pay ₹3.25 as a transaction fee.

SEBI Turnover Charges

The Securities and Exchange Board of India (SEBI) regulates the stock market and charges a small fee on all trades.

Rate: ₹10 per crore of transaction value (0.0001%).
Example: For a ₹1,00,000 trade, the SEBI fee is just ₹0.01.

Stamp Duty

This is a state government tax on the value of shares you buy or sell. The rate varies slightly by state but is generally:

Rate:
Delivery trades: 0.015% of the transaction value.
Intraday trades: 0.003% of the transaction value.

Example: For a ₹1,00,000 delivery trade, you pay ₹15 as stamp duty.

Capital Gains Tax

If you profit by selling shares, you may need to pay a tax on that profit, which is called capital gains tax.

Short-Term Capital Gains (STCG): If you sell shares within one year, the profit is taxed at 20%, plus applicable cess.

Example: If you make a ₹10,000 profit, you pay ₹1,500 as STCG tax.

Long-Term Capital Gains (LTCG): If you hold shares for over a year, profits up to ₹1.25 lakh per year are tax-free. Profits above ₹1.25 lakh are taxed at 12.5%.

Example: If you make ₹2,00,000 profit after holding shares for over a year, you pay 12.5% tax on ₹75,000 (₹2,00,000 - ₹1.25 lakh), which is ₹9,375.

Dividend Tax

If a company pays you dividends, that money is added to your income and taxed based on your income tax slab (e.g., 5%, 20%, or 30%, depending on your total revenue).

Example: If you receive ₹10,000 in dividends and your tax slab is 20%, you pay ₹2,000 in tax.

Account Maintenance Fees

Some brokers charge a yearly fee to maintain your demat or trading account.

Range: ₹0 to ₹800 per year.

Example: A broker might charge ₹300 annually for your demat account.

Margin Funding Charges

If you borrow money from your broker to buy shares (called margin trading), you pay interest on the borrowed amount.

Range: 12% to 24% per year.

Example: If you borrow ₹1,00,000 at 18% interest, you pay ₹1,500 per month if you keep the loan for a month.

Spread Costs

The difference between the price you pay to buy a share and the price you get when selling it is called the bid-ask spread. This difference can be larger for less popular stocks, increasing your costs.

Example: If you buy a share at ₹100 and sell it at ₹99.50 due to the spread, you lose ₹0.50 per share.

Opportunity Costs

When you spend money on stocks, you can’t use that money for other things, like buying a gadget or saving in a bank. This isn’t a direct cost, but something to think about.

Example: If you invest ₹10,000 in stocks, you might miss out on interest from a savings account.

Advisory Fees

If you hire a financial advisor to guide your investments, they may charge a fee, either a percentage of your investment (0.5% to 2%) or a flat amount (₹1,000 to ₹50,000 per year).

Example: An advisor might charge 1% of your ₹1,00,000 investment, which is ₹1,000 per year.

Tips to Keep Costs Low

To make the most of your stock investments, here are some ways to reduce costs:

  • Choose a Low-Cost Broker: Discount brokers often have lower fees than full-service brokers.
  • Hold Shares Longer: Long-term investments (over one year) can save on taxes, as profits up to ₹1.25 lakh are tax-free.
  • Avoid Frequent Trading: Trading too often increases brokerage, STT, and other fees.
  • Use Limit Orders: These help you control the price you pay for shares, reducing slippage.
  • Understand Fees: Check your broker’s fee structure to avoid surprises.

Why Understanding Costs Matters

Investing in stocks can help your money grow, especially if you invest in strong companies and hold your shares for a long time (over five years is often best for good returns). However, the fees and taxes listed above can reduce your profits, so it’s essential to plan carefully. 

Always research before investing, and consider talking to a trusted adult or financial advisor to make wise choices. Stock investing also comes with risks, as share prices can decrease, and you might lose money. By learning about costs and risks early, you’re setting yourself up for better decisions in the future.

Conclusion

Understanding the costs of equity/stock investing in India, such as brokerage fees, taxes like STT and capital gains tax, and other charges like DP fees and GST, is essential for making informed investment decisions. By choosing low-cost brokers, holding investments for the long term, and researching carefully, you can minimise these costs and improve your chances of growing your wealth. 

While stock investing offers exciting opportunities, it also involves risks, so always proceed thoughtfully and seek advice from trusted experts. With this knowledge, you can start your investment journey wisely.

Can't get yourself started on taxes?
Get a Cleartax expert to handle all your tax filing start-to-finish
About the Author
author-img

REPAKA PAVAN ADITYA

Stocks and Mutual Funds Research Analyst
social iconssocial icons

I manifest my zeal in financial quantitative & quantitative research and have been instrumental in creating a robust process for the evaluation and monitoring of mutual funds. I’m responsible for Equity and Mutual Funds Research while creating instrumental mathematical models for portfolio construction after evaluating funds, and I play an integral role in analyzing changes in mutual funds, micro, and macro-economic indicators, and equity market events and trends. My views on asset classes which are integral in creating an investment strategy for any profile. Read more

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Privacy PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption