What are DP Charges

Every Indian investor has to pay some charges irrespective of whether they are making a profit or a loss. These universal charges apply to all investors. However, individuals who have just started their investment journey do not know why these charges are levied. Depository participants (DP) charges are one of them, which is generally difficult to understand.

This blog briefly discusses the importance of DP charges, the process of levying the charges, and essential things to know about these charges.

What Do DP Charges Mean?

DP charges are a mandatory fee which is levied on each sell transaction from your Demat account. These charges are different from brokerage fees and are not included in contract notes. You have to pay these fees for trading using a brokerage platform. When the DP releases the stock and it appears on the trading account to execute the sale transaction, an amount is deducted from your account.

These charges are fixed and are not the same as stamp duty, brokerage fees, and others. Hence, you must pay the same percentage of charges whether you sell 10 or 100 shares.

Who Levies DP Charges?

Since you have the basic knowledge of what are stock DP charges, now let us understand who levies these charges. Depositories like the Central Depository Services (India) Limited (CDSL) and National Securities Depository Limited (NSDL) and their participants levy these charges as their source of revenue.

CDSL will collect DP charges if you sell shares on the Bombay Stock Exchange (BSE), and NSDL will collect the charges if you sell them on the National Stock Exchange (NSE). DPs or registered stockbrokers levy these charges because they act as the mediator between the depositories and investors.

Why Are DP Charges Levied?

DPs levy these charges from investors to run their operations. A DP needs to register with CDSL and NSDL to get a license for business operations before offering Demat account opening benefits to customers. They must pay a huge amount to the Securities and Exchange Board of India (SEBI), CDSL, and NSDL. These charges help the DPs recover from upfront money to get a license from the depositories.

For instance, a stockbroker has to pay application processing fees, SEBI fees, a refundable security deposit, connectivity charges, software maintenance charges, and training fees to become a DP. The DP charges collected from investors help DPs recover the upfront money to get the licence from SEBI, NSDL, and CDSL.

How Are DP Charges Levied?

DP charges vary from one broker to another, including a fixed transaction charge levied by the depositories. For instance, INR 3.50 per transaction is levied for each sell transaction by CDSL, along with the levied charges from the DP. A discount of INR 0.25 will be included on debit transactions for female investors.

If company ABC is a DP, which charges INR 10 along with the INR 3.50 from CDSL, its DP charges will be:

For male investors: INR (10+3.50)+18% GST per debit scrip each day

For female investors: INR (10+3.25)+18% GST per debit scrip each day

If you have opened a Demat account from PL Capital Group – Prabhudas Lilladher, you will be levied the following charges:

Important Things to Know About DP Charges

You have to pay a fixed amount of DP charges for each share sale transaction. Below are the important things that you need to know about DP charges:

1. You only have to pay these charges for selling shares and not for buying.
2. You have to pay the fixed charges once for selling shares of one stock, even at different times of day. However, if you sell shares from more than one stock, you have to pay it multiple times.
3. These charges are non-negotiable and are not included in the brokerage fees.
4. DP charges can vary from broker to broker.

Conclusion

Understanding what is DP charges in share market is crucial to individuals who have just started their investment journey. Levying DP charges is important for stockbrokers to run their operations. The stockbrokers also transfer a significant portion of these charges to the depositories.
Want to know more about DP charges and a Demat account? Download the PL application and create a Demat account for free! We provide you with the best investment solutions to grow and transfer wealth.

Frequently Asked Questions

1. What is a Depository?

A depository is an authorised financial institution that holds the transfer of your securities in electronic form with the help of DPs.

2. Who are Depository Participants?

A depository participant or DP is an organisation that acts as an intermediary between the depositories, like the CDSL, and investors in India.

3. What is stock DP charges?

DP charges are a fixed amount that a DP levies from an investor to run their business. Different stockbrokers levy different DP charges on an investor.