DP charges apply if you sell shares from your demat account. This is an income source for depositories (CDSL or NSDL) as well as its Depository participants (Stock brokers). DP charges are applicable only one time per scrip in a single day irrespective of the quantity you actually sell.
When you execute any trade, you always consider brokerage charges and you keep in mind that whenever you book profit, it should be more than the brokerage charges to be in a net gain situation.
But all our calculations mismatch many times, as there is one more charge that is levied which is not even reflected in contract notes. Yes, you read it right and these charges are known as DP charges.
So what actually are DP charges? Let’s try to understand:
What are DP charges?
DP stands for ‘Depository Participant’ which acts as an agent to the depository. They are intermediaries between the depository and the investors (i.e. NSDL/CDSL and you) providing you various services like Dematerialisation, Rematerialisation, transfer of securities, pledging of securities, corporate action benefits, etc.
So the DPs hold your securities, provide you various services and for that they charge you a fee, which is known as DP charges.
Therefore, DP charges are flat transaction fees levied when you sell any shares from your demat account irrespective of the quantity you sold. This is how depositories and its participants generate revenue and it is very much similar to how brokers charge brokerage or exchanges charge a transaction fee.
What is DP charges in Zerodha?
So, in case of Zerodha, these charges are levied by CDSL (the depository) and Zerodha (the Depository Participant).Current charges are at Rs. 13.5 per scrip for the stocks sold from your holdings. It must be noted that an additional 18% GST is added on Rs. 13.5 which effectively makes it Rs. 15.93.
So every time you sell your holdings, you will be charged Rs. 15.93 as DP charges along with the normal brokerage charged by Zerodha Broking Ltd.
However, w.e.f. 3rd May, 2019 Zerodha gave an advantage by waiving off DP charges (that were charged at Rs.5.5) on mutual fund redemption. This could indeed save you some money on mutual fund investment!
Why are they not shown in contract notes?
Lets see why DP charges are directly posted on ledger and do not appear on the contract note:
DP charge is levied on the stock movement out of your demat account managed by NSDL/CDSL (the depositories).
The contract note only captures charges related to trades executed on stock exchanges. And since DP charges are not associated with your trade, they are not reflected on contract notes but are levied separately on your ledger.
Can we avoid DP charges?
This is a very common doubt that traders ask. And the answer is NO.
In fact, DP charges are levied when you sell shares from your demat account, no matter you open an account with any of the stock brokers in India. The rate may differ from broker to broker, some charge on the higher side while others stick to a nominal fee.
You cannot skip paying DP charges in delivery trades. However you can move away from selling holdings to avoid them. So, if you do intraday trading, take BTST trade, or trading in the futures segment, you can avoid DP charges.
DP stands for depository participants. Zerodha happens to be a depository participant for CSDL. When a user sells their shares from their Demat account, then a DP charge is applied. The charge is fixed irrespective of the number of shares in that particular order.
Zerodha DP charges are Rs. 13.5 + 18% GST as per depository (CDSL). It is charged always whenever traders sell their stocks after holding it for more than one day in demat account.