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1. What is Equity Investing?

The investment made towards the purchase of shares of any company is referred to as equity investment. In simple words, this is the money spent on buying the shares of a company trading on the stock exchange where the investors buy the shares in anticipation of appreciated value through capital gains or dividends from the company.

2. Benefits of Equity Investments

The prime source of gain in equity investments is the possible increase in the value of the principal invested amount; which comes either in the form of dividends or capital gains. With a minimum initial investment, you can get diverse investment options and your fund can further increase with this investment by investing in the right shares to raise more capital.

3. Is there any cost involved with investing in equity?

There are a number of charges that an investor has to bear when buying or selling shares. When you make profits in the stock markets, these are taxable in excess of Rs 1 Lakh. Some of the most common forms of cost include Brokerage Charges, Stamp Duty, Securities Transaction Tax and other charges.

4. Brokerage Charges

As is suggestive of the name this fee is charged by the broker as his commission for the services rendered. For instance, if your transaction amounted to INR 1,00,000 you broker may charge a commission of 0.3 percent on that transaction which will amount to INR 300.

a. Full-Service Brokers

These are brokers who provide an all-inclusive trading service that includes trading in stocks, currency, and commodities as well as related service of research advisory, management of sales and assets, investment banking, etc. The charges of a full-service broker could range from anywhere between 0.01 percent to 0.50 percent brokerage charges on the delivery and Intraday trading.

b. Discount Brokers

Discount brokers provide investors with an execution platform for trading and charge a commission on their service. They, however, do not offer any investment advisory services. Their charges could range from anywhere between a flat fee of INR 10 or INR 20 per trade on intraday trading and delivery but you may also come across some discount brokers who do not charge any sort of fee on delivery trading. As investors, understand that you need to pay a brokerage fee on both sides of the trade which is while buying as well as selling a share. But again, it is not entirely uncommon to come across some brokers who charge a brokerage fee only on one end of the transaction, that is either on selling or buying.

5. Charges on Share Trading

a. Securities Transaction tax

This is charged second only to the brokerage charge and is charged on both sides of the buy and sell transaction. In case of intraday trading, the STT is only charged when the stock is sold. STT charges about 0.1 percent of the total transaction, on each side of trading, for delivery in general. The charges for intraday STT is around 0.025 percent of the total transaction on the selling side.  

b. Stamp Duty

This fee is levied on the value of shares that are transferred and in India, this rate differs from state to state as the duty is levied by various states. It is charged on both the buying and the selling sides, charged on the total turnover amount.

c. Service Tax

Service charge is 15 percent of the brokerage charge paid by you and is the same for delivery as well as intraday trading.

d. Transaction Charges

Charged by the stock exchanges, these are charged on both sides of the trading with the charges for intraday and delivery being the same. A transaction fee of 0.00325 percent of the total amount is charged by the National Stock Exchange, while a transaction fee charged by the Bombay Stock Exchange amounts to 0.00275 percent of the total amount.

e. Securities and Exchange Board of India (SEBI) Turnover Charges

The apex market regulator of the securities markets in India charges a fee on both sides of a trading transaction with a turnover charge of about 0.0002 percent of the total amount. The charges though are the same for both intraday and delivery trading.

f. Depository Participant Charges

The two stock depositories in India, the Central Depository Services Limited and the National Securities Depository Limited charge a fixed sum for keeping your transactions in an electronic form. The depository participants, who happen to be your Demat account company or your broker company, are charged while the depositories don’t charge the investors directly. The depository participants form the bridge between the investors and the depository as investors can’t directly approach the depository. Therefore, the depository charges the depository participant who in turn charge the investors.   Depository participants charge a flat fee between INR 10 to INR 35 for delivery trading, not for intraday.
  Another point traders must be aware of is the impact of the Capital Gains Tax. There are two types of Capital gain Tax:

A. Short term capital gain tax

When you sell your holdings before the completion of 1 year since buying it is considered a short term.   When you trade for a short term, a flat 15 percent is charged on the profit as short term capital gain tax.  

B.  Long-term capital gain tax

Like the name suggests, if you get rid of your stock post one year of buying it is considered a long-term investment and the gains are known as long-term capital gain (LTCG). LTCG in excess of Rs 1 Lakh is taxable at the rate of 10% without the benefit of indexation. These are some of the charges that an investor or trader must keep in mind when seeking to trade on the stock markets. Besides this, the most important aspect to keep in mind is with regards to the risks involved in these tradings. Do your research before participating in the stock market and get expert financial advice as well. No amount of saving on the trading fee will render results if you lose out on your investments due to careless investing.

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