What are the charges and taxes that we are paying while trading?
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Realize the Expenses Incurred in Demat/trading stock:
Transaction Charges:
A trader shall have to shell out a few bugs to get the transactions done in the Demat account. Whenever a trader/ investor buys or sells a stock/share, the brokerage collects a fee to conduct the trading.
Besides brokerage charges, the investor remits different taxes through the assigned broker.
They are
Demat Account Charges:
To buy/sell the electronically stored stocks, the government of India has set up a security mechanism in the interest of the retail/corporate traders.
The government of India has authorized Central Securities Depositories like NSDL or CDSL to safeguard the Demat accounts.
Therefore, to keep the Demat services under scrutiny, the Central Securities Depositories collects a nominal fee. It can vary somewhere between INR 100 to INR 750 (Depending on the No. of shares and the value of shares bought).
Tax on Gains
Most of the beginners never see what are the charges and taxes that they are paying while trading. There are about 6 to 7 different charges that we are paying on each trade.
The brokerage charges are varied from broker to broker. The remaining charges are same in all broking accounts.
The charges are also depends on the type of trade we execute.
Every year, an investor needs to file income tax returns at the IT department. In this process, the IT department classifies the nature of earnings through asset classes.
What is LTCG & STCG?
A long-term investment maintains stocks in stock markets for a longer duration thus forming a greater financial stocks balance.
In order to retain such conditions, the CBDT discounts taxation on capital gains on long-term fundings.
While the opposite happens if an investor plans to back out by selling shares within a year of its investments.
The IT department doesn’t bother about the losses incurred by an investor through selling though. It is made mandatory to tax the stock funds whether an investor incurs gain or loss.
Now, in gist, to say, the long term Capital Gain (LTCG) produces a fair amount of profitability than Short Term Capital Gain (STCG).
Hence, the government of India encourages long-term investments in all asset classes.