There are a lot of freshers who start to invest in the stock market but are oblivious about certain charges. One of those is DP transaction charges. They don't know what DP charges are. Why are they charged? And how much amount is charged? Today we will cover all such questions.
DP charges full form -Depository Participant charges.
Before understanding DP charges, let us first understand what is meant by Depository. You can think of a Depository as a bank where your Demat account is maintained. A Demat account holds a depository. There are two depositories provided by your Demat account. These are CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited).
You can choose any broker, but your Demat account will be operating under either of these two depositories. Whenever you buy shares of any company, the shares are transferred to your Demat account. These companies keep your shares safe. In return, they charge fees from you. A depository participant is a mediator who carries out the transactions on behalf of the customer.
A depository participant must be registered under any of the above depositories. All of these depository participants must pay a membership fee to CDSL or NSDL in the thousands of dollars, as well as other fixed costs and prior prepaid transaction charges. Brokers, as expected, pass these costs on to their consumers by charging an extra fee to cover these costs.
So, Depository Participant (DP) charges are the charges levied by a brokerage firm or stockbroker, which is a depository participant, and the Depository (NSDL and CDSL) when you sell a stock.
DP charges are flat transaction charges on the sale of shares. It means they are unaffected by the volume of shares you sold. To put it simply, the DP charges will be the same whether you sell one share of ABC company or 1000 shares of ABC company. You must note that the charges are applicable per company per day basis.
What are DP Transaction Charges?
If you sell your shares using your Demat account, you are required to pay DP charges. On a per-company-per-day basis, CDSL charges Rs. 5.50. NSDL, on the other hand, levies Rs. 4.50 per company every day. Let us see an example to better grasp this.
Investor P, for example, chooses to sell one share of business A. If P has a CDSL Demat account, he will be charged Rs. 5.50 to sell one share during the course of one day. P will have to pay Rs. 4.50 to sell a single share during a one-day period if he has a Demat account with NSDL.
SO, apart from brokerage charges, you will be levied DP charges of (₹4.5 for NSDL or ₹5.5 for CDSL) + Debit charges levied by the stockbroker. DP charge is calculated in this way. These charges vary from broker to broker.