How to Calculate Brokerage Fee in the Stock Market?

How To Calculate Brokerage Fees

3 Min Read |  March 26, 2021


When you trade in the stock market, it’s obligatory to keep yourself updated with all the charges and brokerage fee associated with it. 

For those who aren’t aware and wish to start trading, you must know that trading in shares demands various types of charges. Those charges include the service tax, STT (Security Transaction Tax), brokerage charge, stamp duty, and others. 

Among all of these charges and costs, the STT and brokerage charges are the most common ones. 

As the name suggests, brokerage charges are levied by the brokers. Every broker imposes a different charge which depends on the kind of facilities and services they offer. There are mainly two types of brokers and therefore, the brokerage charge depends on the kind of broker you select. 

Once you have opened a Demat and a Trading Account, you’re all set to trade in the share market. But one thing that you must take note of is that you can’t trade directly in the stock market. You are supposed to trade in shares and securities and need a broker for the same. 

The emergence of the internet has opened up a way to numerous options where you can use any online broking platform provided by different stockbrokers.

Hence, before you opt for any broking platform, you must find out the various charges associated with them. 

In this blog, we will learn how one can calculate the brokerage fee and even before that we will have a quick walkthrough about brokers. 

Who is a Broker? Types of Broker

A broker is an agent or middleman or financial intermediary through which you trade in stock markets. The services of a broker are required to trade in different financial instruments such as stock, futures, and derivatives. 

In India, Zerodha and Upstox are the most common and popular brokers. 

Types of Brokers

There are two types of brokers in the stock market:

  1. Full-Service Brokers: Such stockbrokers offer brokerage services along with a range of other features such as advisory and market reports, customer service, and cutting-edge research. Full-service brokers perform researches for you, manage your assets and sales and offer you expert advice. The full-service broker’s charges range from 0.01% to 0.50% on both delivery and intraday trading.

  2. Discount Brokers: Such brokers offer lesser broking charges as compared to full-service brokers. The charges are called fixed service. Discount brokers charge a fixed fee per trade i.e., a flat fee of Rs. 10 or Rs. 20 in case of delivery or intraday trading. However, they don’t provide any other services. 

In India, three various kinds of brokerage plans are offered to the people:

  1. Brokerage based on a Percentage Trading Volume

  2. Unlimited Monthly Trading Plan

  3. A flat brokerage charged per trade

How to Calculate Brokerage Fee?

You must remember that you have to pay brokerage charge while you buy and sell stocks.  You may find an exception to this, as you are charged a one-time fee for buying or selling.  

If you don't know how to calculate intermediaries in the stock market, this example will help you to understand it.  

Suppose the dealer charges 0.05% for intraday transactions/trading. 

This means - the brokerage fee is 0.05% of total turnover. Suppose the price of the stock you buy is Rs. 500. In this case, the dealer fee is 0.05% of Rs. 500 which equals Rs. 0.25.

In this case, the total brokerage fee is Rs. 0.25 + 0.25, which is Rs. 0.50 for both buying and selling. 

The breakdown is calculated based on the number of shares in the fixed segment. Therefore, the formula for brokerage fee is as follows:

Delivery brokerage = Market price of 1 share x Number of shares x 0.05%

Intraday brokerage = Market price of 1 share x Number of shares x 0.50%

Since the competition amongst brokers is increasing every day, the brokerage fee/charge is becoming more affordable. 

Other Charges that Make Up the Net Trading Cost 

Once you have selected a broker, you must assure that the brokerage applied to your transactions matches the offer you both agreed on. You should also check whether the brokerage applied is for periodic intervals or not. 

The broker will deduct the ‘Annual Maintenance Charge’ (AMC) from your account. So, you should be aware of these charges too. 

In case the AMC charge is deducted every month from your account, it deducts a certain portion of your investment. Therefore, in such conditions, we advise you to pay in bulk at the starting so that your AMC charges will be nullified. 

On average, the lumpsum amount figure equals around a one-time payment of Rs 500-700. 

However, the rate of brokerage charged effectively differs from the percentage mentioned above.

In addition to brokerage fees, you must also pay a large number of other fees (depending on the type of financial instrument), which includes the total trading cost.  These are: 

Transaction fees: Also referred to as Exchange Trading fees, transaction fees are charged by stock exchanges, such as the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), etc.  

Securities transaction fees: These fees are charged based on the value of the securities being traded.  

Commodity transaction fee: This tax applies to commodity derivative products.  

Stamp duty: The state government collects fees for securities transactions. 

GST: It’s a union government tax, which is 18% of transaction fees and brokerage costs.  

SEBI turnover fee: The charge collected by SEBI, the stock market regulator, is used to trade all types of securities except debt securities.

One can calculate the net trading cost using this formula:

How to Calculate Brokerage fees

Whatsapp Icon

Why you should subscribe to daily WhatsApp Newsletter ?