A Brokerage Calculator is an online trading tool that estimates trading costs for investors and traders on a brokerage platform. This tool helps them understand fees and other common charges like taxes, brokerage charges, stamp duty, and so on. Here are some essential brokerage calculator terms every investor must learn.
Essential Brokerage Calculator Terms
Here are the important brokerage calculator terms you need to know for online stock trading.
1. Brokerage Fee
Brokerage Fee is the fee charged by brokers or agents to execute trades. The amount varies according to transaction type or size and other services. This amount can be fixed or a percentage of the trade value. For investors, low brokerage fees can increase profitability. This also depends on the frequency of transactions.
2. Securities Transaction Tax
Securities Transaction Tax or STT is a tax levied on securities trading in India. These securities include stocks, mutual funds, and derivatives. STT is categorized as a direct tax, therefore, it is levied directly on the transaction value of the securities.
3. Goods and Services Tax
Good and Services Tax (GST) is a uniform tax that simplifies taxation by combining multiple taxes. GST aids businesses in cumulative accounting making processes simpler. In the share market, a total of 18% GST is levied. 9% central GST and 9% State GST applies.
4. Stamp Duty Charges
Stamp Duty is a tax levied on the transfer of securities like stocks, derivatives, and mutual funds. This tax is charged to the buyer during trade execution and varies according to the transaction. The duty is collected by exchanges or depositories and transferred to the state government.
5. Depository Participant Charges
Depository Participant Charges or DP Charges apply when shares are sold through a broker. These are fixed charges that cover stock release by National Securities Depository Limited and Central Depository Services Limited to execute transactions. Unlike brokerage or stamp duty, DP charges remain constant regardless of shares sold.
6. Margin Requirement
The margin requirement is the minimum amount traders must maintain in their accounts to execute leveraged trades. For instance, if a broker requires a 10% margin, investors must have Rs 10,000 in their account to trade Rs 1, 00,000 worth of stocks using leverage. The aim is to ensure the presence of sufficient funds to cover losses.
7. Exchange Transaction Charges
Exchange Transaction Charges are those charges or fees that are imposed by stock exchanges for executing trades. Equity cash segment, equity futures, equity options, currency futures, currency options, commodity futures, and commodity options are Exchange Transaction Charges under NSE. Currency futures, currency options, equity options, and equity cash segment charges are levied by BSE.
8. SEBI Turnover Fee
SEBI Turnover Fee is the regulatory fee imposed on stock market transactions by the Securities and Exchange Board of India. It is charged on the total traded value and is collected to maintain market integrity. The authority charges 0.0001% of the turnover for buy and sell transactions in equity.
9. Breakeven
Breakeven is the trade price at which a trade neither makes a profit nor incurs any loss. This amount includes all applicable charges like taxes and fees. This ensures that traders understand the minimum price movement required to start earning a profit.
Based on this, Net Profit/Loss calculation is done. This amount is calculated after deducting all charges including brokerage, taxes, and transaction fees from the trade value. For instance, if investors buy stocks worth Rs 50,000 and sell them for Rs 60,000 but pay charges worth Rs 1,000 then the net profit is Rs 59,000.
Conclusion
Every investor must learn about these basic terms before stepping into the stock market. As a trader or investor, learn and research as much as possible to educate yourself and to know which position may be beneficial to you and what to avoid.