How to Avoid DP Charges: Everything You Need to Know

Trading in the share market offers significantly high returns, but there are underlying subtleties and fees that investors need to be aware of. One such example is Depository Participant (DP) fees. But what are DP charges, and why do they matter? More importantly, is there a way to avoid them?

From the entities that levy them to specific trading strategies that circumvent such fees, everything is explained below.

What is a Depository & Who are DPs?

Before answering the question 'What are DP charges’, it is crucial to grasp what a depository and a DP are.

Like a bank, a DP handles the assets and securities you purchase. Even so, a DP could be the bank or the brokerage firm you associate with.

For instance, if a bank hosts a designated demat department, it may take up the mantle of a DP. It all boils down to which financial entity holds the authority to open and manage a demat account on the investor’s behalf.

Now, when it comes to investing in stocks, bonds, or other kinds of securities, a depository is simply the centralized space where all shares are deposited.

As such, India has two primary operating entities in this context, that being the following:

• The National Securities Depositories Ltd. (NSDL)
• The Central Securities Depositories Ltd. (CDSL)

The depositories mentioned above are directly attached to the two prominent Indian stock exchanges. In short, the National Stock Exchange (NSE) promotes NSDL, while the Bombay Stock Exchange and public-sector banks push CDSL.

Note that neither should be viewed as 'better than the other'. In fact, investor interactions with the NSDL and CDSL are directly linked to the stock exchange they trade-in.

What is DP Charges?

DP Charges Full form is Depository Participant charges. DP charges are a fixed fee levied by depositories for specific trades from your Demat account. The underlying concept here is similar to that of brokerage charges or DP transaction charges.

Let’s understand this better with the example below:

Say, you have a Demat account with Choice India. Considering that the firm is associated with the NSDL and the CDSL, you could execute your trades within the NSE or the BSE. Let's say that you choose BSE.

Now, each trade you make will incur a fixed charge. This amount will be directly levied by the CDSL and the DP (Choice India, in this case). The base CDSL charge is 5.5 INR. For this example, let's assume Choice India charges 7 INR. That would bring the DP charges for each scrip to 13.5 + X% GST per day.

So, if you sell 50 shares of XYZ company in the morning and 50 shares of ABC company in the afternoon, your DP charges will amount to:

13.5 INR + 13.5 INR = 27 INR + X% GST

However, if you sell 50 shares of XYZ company once in the morning and then again in the afternoon, you will have to pay 13.5 INR + X% GST. Put simply, the number or quantity of stocks and shares does not determine DP charges. Instead, the scrips do.

A few other critical elements to note are as follows:

• The ledger or the contract notes do not list DP charges
• Charges incur only once per scrip, regardless of the number of shares
• Fees only apply when stocks are debited into or credited from your demat account

Since DP charges only incur once per trade and are nominal, their impact goes relatively unnoticed on your margins. Regardless, if you frequently sell multiple scrips, you could be looking for a way to negate such fees.

That brings us neatly to the next bit: Intraday Trading.

Are DP Charges Applicable for Intraday Trading?

The simple answer is ‘NO’. That said, it is vital to understand why this is the case.

In almost all instances, it takes T+2 days (2 days after the transaction) for shares to be deposited or credited from your demat account. And at its fundamental level, intraday or day trading involves the purchase and sale of shares in the same session or day.

So, whatever you buy or sell is never reflected in your account and is only held in a digital ledger.

Now, consider one of the core aspects of DP charges: Fees are only applicable when the shares are debited into or credited from your demat account. Essentially, depositories and participants have nothing to charge you on.

Let’s take this a little further with the example listed below:

You have just identified a profitable stock in the Oil & Gas sector. After doing your due diligence, you purchased 200 shares at 500 INR.

Owing to the volatility in the stock market, share prices jumped to 520 INR on the same day. This would put your potential margin at 4000 INR. Then, the price dips (on the same day) to 510 INR. Accordingly, you buy another 50 shares.

Before the market shuts, you sell all 250 shares at 550 INR. That would net you a profit of 12,500 INR.

Now, despite making multiple trades, you would not have to pay a DP charge because the shares were never deposited or transferred from your account. And, incidentally, you also benefitted from a handsome margin from your transactions.

This is why investors prefer intraday trading for making short-term gains. The absence of DP charges is just an added benefit.

Avail of the Lowest DP Charges at Choice India

While it offers multiple benefits, intraday trading is not always viable. For instance, share prices may dip significantly on the same day, rendering the strategy useless. That is why it helps to partner with a brokerage firm that offers low DP charges.

That is precisely where Choice India steps in.

Investors can leverage the lowest DP charges at Choice India, in addition to multiple other benefits, including the following:

• Free demat account opening
• Zero Account Maintenance Charges (AMC) for the first year
• Dedicated and free market research and advisory services
• Low brokerage fees
• Integrated referral program to earn rewards

With over 25 years of service and industry experience, Choice India is one of the most reliable brokerage partners for amateur and veteran investors alike.

Wrapping Up

DP charges, though nominal, can be a hindrance for investors who make frequent and multiple trades over a designated period. And while they can be avoided, it is best to align yourself with a brokerage firm that mitigates the impact of such fees.

Investors can do precisely that by taking advantage of the lowest DP charges at Choice. You can even calculate your brokerage with our free brokerage calculator. After all, your financial security matters to you. We ensure that nothing threatens it.

Frequently Asked Questions

Aside from intraday trading, is there any other way to avoid DP charges?

BTST trading offers the same advantages as intraday trading. In short, buying and selling shares occur before they are deposited into your account. The derivatives market, such as Futures & Options, have no DP charges either.

What is the process for opening a Demat account at Choice India?

Choice offers a simplified and convenient way to open a demat account. Potential investors can either do it from the mobile app or the web portal. More information regarding Demat account opening process.

How DP Charges are Avoided?

DP charges are avoided if you are doing intraday trading, participating in BTST trading, or making an F&O (Future and Options Trading). If you decide to sell shares from your Demat account, DP charges will apply.