What is DP Charges in Zerodha

Zerodha is India’s largest and most used stockbroker. On Zerodha, you can trade and invest in various shares, mutual funds, and other financial products. Each time you sell any share from your Demat account on Zerodha, there will be a DP Charge which you have to pay.

DP Charges in Zerodha are mandatory charges. They have nothing to do with any brokerage charges.

DP charge is levied only for delivery-based trades that is when you sell your stocks from your investments in the Demat account. DP charges are also different from brokerage fees and it operates per company rather than the quantity of shares being sold. These are charges that are done to sustain your Demat account together with safe transactions.

Let’s now understand what DP charges are and how they work with Zerodha and compare them with other, same kinds.

What Are DP Charges?

DP charges or Depository Participant charges are those charges you pay while selling shares from your Demat account. These charges are levied by depository participants such as banks and brokers. Each time you sell your shares, automatically the DP charges get applied to your account. The depository and the broker collect DP charges.

Your shares are held in an electronic form by the depository, say Central Depository Services Limited (CDSL) or National Securities Depository Limited (NSDL).

DP charges are crucial for long-term investors. Because they directly affect the cost of selling securities and maintaining the Demat account.

When selling shares at Zerodha, a DP charge of ₹13.5 + GST per transaction is applied. It is mainly comprised of three parts:

• Zerodha’s Fee (₹9.50): This fee will cover maintenance/running of the platforms and customer support/operation. The low-cost trading environment can be provided for both casual and frequent traders by Zerodha.
• Central Depository Services Limited (CDSL) Fee (₹3.50): This charge is made by CDSL for the safekeeping of shares and transferring the same. It ensures there are no mistakes in transferring the shares from the seller’s demat account to the buyer’s account.
• Goods and Services Tax (GST) (₹0.90): The total aggregate of Zerodha and CDSL charges is 18% GST. This is also a government tax, which goes into reaping the fruit of the tax-authorized shops.

These together form the cost of trading. Thus, it is intrinsic to learn about fees as part of any workable trading plan and cost management strategy.

Role of Depositories in DP Charges

Depositories play a central role in the imposition of DP (Depository Participant) charges. In India, the main two depositories are NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited). CDSL and NSDL are places where your shares are kept safe. They retain your shares electronically instead of holding the physical certificates of shares. This also accelerates the transaction of buying and selling a share more safely.

At the time of selling shares held in your Demat account, the depository will shift these shares from your account to the buyer’s account. They collect a fee for this service. It is one of the DP charges. Your broker, such as Zerodha, collects that charge from you and then passes it on to the depository.

DP Charges in Zerodha: How They Work

At Zerodha, whenever you sell shares from your Demat account, they add DP charges. These are not visible on the contract note but would have been charged directly from your trading account balance. It would appear in your fund’s statement once you make the sale.

Zerodha’s DP Charges Structure Explained

Zerodha’s DP charge structure is very simple. Every time you sell shares, you have to pay ₹13.5. That includes not just the ₹9.50 charged by Zerodha but ₹3.50 charged by CDSL and on top of that, an 18% GST is also charged on this.

On CDSL, there is a minimal discount if the holding account is held by a lady wherein the total charge made will be ₹12.75 per trade instead of ₹13.5.

Breakdown of DP charges:

• Male primary holder: ₹13.5 + 18% GST
• Female primary holder: ₹12.75 + 18% GST

These charges are applied per company or scrip, not per share. So, if you sell one share or a thousand shares from the same company in one day, the DP charge remains the same. If you are selling shares of various companies, then for every company, DP charges are levied separately.

Zerodha and SBI Capital:  The AMC fees for personal accounts in SBI Capital will charge about ₹500 for the year. As compared to this, Zerodha would cost ₹300 per year. This helps give a comparative outline of the costs totaled on many platforms.

How Are Zerodha’s DP Charges Calculated?

Zerodha applies DP charges based on the number of companies whose shares you sell on a particular day. Here’s how the calculation works:

1. If you sell shares of one company multiple times in a day, DP charges will be applied only once.
   For example:
   • You sell 100 shares of Reliance at 10 AM and another 50 shares at 2 PM. DP charges will be applied only once for ₹13.5 + GST.
2. If you sell shares of different companies on the same day, DP charges will apply separately for each company.
   For example:
   • You sell 50 shares of Reliance at 10 AM and 10 shares of Infosys at 2 PM. DP charges will be ₹13.5 for each company, totaling ₹27 + GST.

This means if you sell shares of 5 different companies in a single day, you will be charged DP fees 5 times.

Types of DP Charges in Zerodha

Zerodha applies different DP charges depending on the type of transaction. Let’s look at some key types of DP charges:

DP Charges in Zerodha for Delivery

DP charges are charged only on delivery trades. So, whenever you buy shares and keep those in demat and sell them later, DP charges are applicable.

However, intraday and BTST (buy today, sell tomorrow) wouldn’t have to pay DP charges because your shares never enter your Demat account.

DP Charges for Equity Delivery Trades

DP charges are levied when one trades in equity delivery if the holding exceeds more than a day. It means if a person buys some shares today and sells them after a week or a month, the sale is charged DP.

DP Charges for Mutual Funds Transactions

Zerodha does not charge any DP fees for mutual fund transactions. You neither have to pay the DP charges while buying nor while selling mutual funds at Zerodha’s platform. This makes Zerodha quite a good option for investors who prefer mutual funds over stocks.

How to Avoid DP Charges in Zerodha?

While DP charges are unavoidable for trades in equity delivery, some strategies can avoid or minimize such charges:

• Intraday and BTST Trades: No DP charges are levied on intraday trades, wherein you buy and sell shares on the same day. If you do BTST trades, whereby today you buy and tomorrow you sell, the shares never come into your Demat account; thus, there are no DP charges.
• Trade in Derivatives (F&O): If you do trading in futures and options (F&O), DP charges will not be applicable as these trades do not have shares moving into or out of your Demat account.
• Invest in Mutual Funds: Since Zerodha does not charge any DP fees on mutual fund investment, this is also a zero-cost way to avoid the charges if you are interested in investing for the long term.

Comparison of DP Charges with Other Brokers

Zerodha’s DP charges are competitive, but let’s see how they compare with other brokers in the market:

Compared to DP charges, SBI Capital at ₹25 + GST per scrip is much costlier compared to Zerodha costing only ₹13.5 + GST per scrip. Thus, SBI Capital’s charge is pretty close to doubling the charge of Zerodha. Hence, the difference in cost could be tremendous for traders who sell a lot of shares.

However, SBI Capital offers many more services to justify its high costs. They provide portfolio management, research reports, and investment advice. Zerodha, on the other hand, focuses on keeping its prices low and provides a very simple, self-service platform for people who are in search of savings on fees.

While Zerodha’s DP charges may seem slightly higher than some brokers like ProStocks, it makes up for it by offering zero brokerage on equity delivery trades and no DP fees on mutual funds. For long-term investors, this can make a significant difference.

Frequently Asked Questions

Q. 1 Are DP charges applicable to mutual funds in Zerodha?

No, DP charges are not applied for buying or selling a mutual fund through Zerodha. Therefore, in terms of cost, Zerodha is cheap compared to others, who invest through mutual fund transactions. You can invest without any extra charge regarding mutual fund trading.

Q. 2 How can I avoid the charges in Zerodha?

DP charges that cannot be avoided like those of CDSL, since these charges are also related to depository services, though you can limit your charges by trading intraday or investing in mutual funds since no DP charge applies here. This can help you decrease your overall trading cost.

Q. 3 Are DP charges of Zerodha different from other brokers?

Yes, DP charges at Zerodha vary from most brokers by being usually much cheaper. With a differential fee, it can be quite beneficial for frequent traders and long-term investors. On Zerodha, you could save transaction costs as opposed to using traditional brokers.

Q. 4 Are DP charges applicable for buying shares?

No, DP charges are applicable only while selling shares from the DP account. It does not charge when one buys and holds shares. So, one can buy shares on a cost-effective basis. This helps in managing the trading cost-effectively.

Q. 5 What is the structure of DP charges in Zerodha?

DP charge is a charge of ₹13.5 per transaction in Zerodha. This comprises charges that are assessed by Zerodha, CDSL charges, and GST, wherever applicable. The fee so kept transparent has ensured a cheap cost for investors.

Q. 6 Is the DP charge applicable to all Traders?

No, DP charges are not levied on all the traders; they only relate to the sale of shares from the Demat account. So if you are not selling shares you don’t incur those charges also. This means a certain trading strategy can avoid these fees entirely.