Have you ever wondered why your total bill is slightly higher than the share price you saw before placing your trade? If you've traded in the Indian share market, you've probably noticed some fees in your contract note. One of these charges is known as transaction charges by exchanges.
But what exactly are these charges? Why are they applied? How much do they cost? And who collects them?
This blog will explain everything about transaction charges by exchanges in India.
What Are Transaction Charges?
Transaction charges are fees levied by stock exchanges like NSE (National Stock Exchange), BSE (Bombay Stock Exchange), and MCX (Multi Commodity Exchange) for every trade executed through them.
These charges are not random. They are structured, regulated, and applied on every buy or sell order that is executed via the exchange’s trading platform.
In simple words: Every time you buy or sell stocks, the exchange charges a small fee for processing your trade.
Why Are Transaction Charges Applied?
Stock exchanges are not just matchmaking platforms. They provide:
These services require massive technology and operational costs. Transaction charges help exchanges recover these costs and maintain a secure, fast, and reliable environment for traders.
Who Levies Transaction Charges?
In India, transaction charges are levied by:
These charges are collected through your broker, who later pays it to the exchange. They are visible in your trade confirmation note or contract note.
Transaction Charges by NSE, BSE, and MCX (Latest Data)
Transaction charges vary depending on:
Let’s break them down.
A. NSE Transaction Charges (As of 2024)
| Segment | Charges (per Rs. 1 crore of turnover) |
| Equity delivery | Rs. 325 |
| Equity intraday | Rs. 325 |
| Equity future | Rs. 190 |
| Equity options | Rs. 5000 on premium turnover |
| Currency Derivatives | Rs. 90 |
B. BSE Transaction Charges
| Segment | Charges (per Rs. 1 crore of turnover) |
| Equity Delivery | Rs. 275 |
| Equity Intraday | Rs. 275 |
| Equity Derivatives | Rs. 100 |
C. MCX Transaction Charges
| Segment | Charges (per Rs. 1 crore of turnover) |
| Commodities | Rs. 260 |
Note: Charges may change over time. Always confirm with the exchange or your broker.
How Are Transaction Charges Calculated?
The charges are calculated as a percentage of turnover.
Formula:
Transaction Charge = (Turnover × Exchange Rate) / 1,00,00,000
Example:
Suppose you buy 100 shares of a stock at Rs. 500, and sell them at Rs. 510.
If exchange charges Rs. 325 per crore, then:
Transaction charge = (1,01,000 × 325) / 1,00,00,000 = Rs. 3.28
Are Transaction Charges the Same for All Instruments?
No. Transaction charges vary depending on:
For example:
Who Pays the Transaction Charges?
The trader or investor (you) pays the transaction charges.
These are part of your total trading cost and are automatically deducted by your broker.
Whether you're making a profit or loss, these charges are applicable per trade.
Transaction Charges vs Brokerage Charges
These are not the same, although both are part of your trading cost.
| Criteria | Transaction Charges | Brokerage Charges |
| Charged by | Stock Exchange | Stock Broker |
| Fixed or Variable | Fixed by exchange | Decided by broker |
| Based on | turnover | Order value or per trade |
| Mandatory | yes | Yes |
| Can you avoid it? | no | You can choose a discount broker |
Complete Cost Breakdown of a Trade
When you place a trade, these costs may apply:
Example:
Say you buy shares worth Rs. 1,00,000 and sell them at Rs. 1,05,000.
Here's how the charges might look:
| Charge Type | Estimated Cost (Rs.) |
| Brokerage | 20 (flat rate) |
| Transaction Charges | 6.83 |
| STT | 105 |
| GST | 4.86 |
| SEBI Charges | 0.20 |
| Stamp Duty | 15 |
| Total Cost | Rs. 151.89 |
How to View Transaction Charges in Your Contract Note
After every trading session, your broker sends a contract note. This is an official receipt of your trade.
Inside the note, look for:
Your broker’s platform or app may also show this breakdown under “Charges” or “Tax Details.”
Impact of Transaction Charges on Traders
You might think Rs. 3–5 per trade doesn’t matter. But for:
These charges add up quickly, especially when you place dozens or hundreds of trades a day.
Over time, they reduce your net profit, so understanding and managing them is crucial.
Ways to Reduce Transaction Costs
Here’s how smart traders save money:
Impact of Transaction Charges on Traders
You might think Rs. 3–5 per trade doesn’t matter. But for:
These charges add up quickly, especially when you place dozens or hundreds of trades a day.
Over time, they reduce your net profit, so understanding and managing them is crucial.
Ways to Reduce Transaction Costs
Here’s how smart traders save money:
Common Misconceptions About Transaction Charges
1. “My broker is cheating me with these charges.”
False. Transaction charges go to the exchange, not your broker.
2. “These are hidden charges.”
Not really. All charges are visible in your contract note.
3. “I can skip these by changing my broker.”
No. These are mandatory and applicable across all brokers.
Why Transaction Charges Are Important for Exchanges
These charges help exchanges:
Exchanges are like the highways of the financial system — and transaction charges are the toll.
Tax Implications of Transaction Charges
Transaction charges are considered as a cost of trade. If you are a professional trader or file under business income, these charges are deductible expenses.
Always consult a tax expert to classify them correctly.
How to Include These in Cost of Investment
For capital gains calculation, you can include transaction charges as part of the cost of acquisition or cost of sale to reduce taxable income.
Example: If you bought a stock at Rs. 1,000 and paid Rs. 5 in charges, your actual cost is Rs. 1,005.
Tools to Calculate Transaction Charges
Use:
These tools show real-time estimation of transaction and other charges before placing trades.
Final Thoughts on Managing Transaction Costs
Managing transaction charges is essential to maximize profits. Track them regularly, trade wisely, and avoid over-trading. Make sure your trading strategy accounts for all costs, not just the market movement.
Smart traders don’t just focus on returns — they control costs too.
Frequently asked questions
Q1. Are transaction charges the same for delivery and intraday?
No. While they might be similar in some cases (like NSE), they can vary across exchanges and brokers.
Q2. Do I pay transaction charges when placing or executing orders?
You are charged only when the trade is executed. Unexecuted orders have no charges.
Q3. Are transaction charges tax-deductible?
Yes. For active traders and businesses, they may be claimed as an expense under capital gains or business income.
Q4. Do mutual funds have transaction charges?
No. Mutual fund investments through SIPs or lump sum do not have exchange transaction charges.
Q5. What happens if exchanges change their transaction fee?
Your broker will update the fee structure, and you will see it reflected in your future trades.
Conclusion
Transaction charges by exchanges may seem small at first glance, but they play a big role in your overall trading cost. Understanding them helps you:
These charges are unavoidable but manageable. If you are trading regularly, make sure you account for transaction charges in your strategy. The more you know, the more power you have to control your money.
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