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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 shares of a company traded on the stock exchange where the investors purchase the shares in anticipation of appreciated value through capital gains or dividends from the company.

2. Benefits of Equity Investments

The primary source of profit 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 several charges that an investor has to bear when buying or selling shares. When you make profits in the stock markets, they may be taxable. 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, the broker charges this fee as his commission for the services rendered. For instance, if your transaction amounted to Rs 1,00,000, then your broker may charge a commission of 0.3% on that transaction which will amount to Rs 300.

a. Full-Service Brokers

These are brokers who provide an all-inclusive trading service that includes trading stocks, currency, and commodities as well as related service of research advisory, management of sales and assets, investment banking, and so on. The charges of a full-service broker could range from anywhere between 0.01% to 0.5% 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 for their service. They, however, do not offer any investment advisory services. Their charges range between a flat fee of Rs 10 and Rs 20 per trade on intraday trading and delivery. But, you may also come across some discount brokers who do not charge any fee on delivery trading. Investors need to pay brokerage on both sides of the trade when buying and selling shares. 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 on both sides of the buy and sale transaction. In the case of intraday trading, the STT is only charged when the stock is sold. STT is levied at 0.1% of the total transaction, on each side of trading, for delivery in general. The charges for intraday STT is around 0.025% of the complete transaction on the selling party.   

b. Stamp Duty

This fee is levied on the value of shares that are transferred, and this rate differs across states. This is because the states are in charge to levy and collect stamp duty. It is charged on both the buying and selling sides, charged on the total turnover amount.

c. Service Tax

Service charge is levied at 15% of the brokerage charge paid by investors and is the same for delivery as well as intraday trading.

d. Transaction Charges

Transaction charges are charged on both sides of trading by the stock exchanges. A transaction fee of 0.00325% 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% 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% of the total amount. The charges 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 cost the investors directly. The depository participants form the bridge between the investors and the repository 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: There are two types of Capital gain Tax:

A. Short term capital gain tax

Short-term capital gains tax is levied if your holding period does not exceed one year.   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

As the name suggests, if you sell your stock after a holding period of one year, then it is considered as a long-term investment, and the gains are known as a long-term capital gain (LTCG). LTCG above 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, an essential 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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