What are DP charges and why are they charged? - Motilal Oswal
What are DP charges and why are they charged? - Motilal Oswal

What are DP charges and why are they charged

When we make investments in the online share market, there are a number of charges that are required to be made. Many new investors are oblivious about what these charges are and why they’ve been levied. One charge that is generally difficult to understand is DP charge. This article aims to explain what DP charges means, how do we pay it, and how much are DP charges? If you are looking for more information on the subject of DP charges, keep reading the article to get all the information.

What are DP Charges?

The full form of DP Charges is Depository Participant Charges. To understand Dp Chgs, it’s important to first understand the term ‘Depository’. In stock market terms, the word depository indicates a place where all the shares are deposited. When we purchase shares from any broker planform, those shares are stored digitally on our online Demat account. A Demat account then holds a depository. In India, there are two types of depositories that are provided by a Demat account, namely: CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited).

Regardless of the broker we choose to buy or sell our shares from, our Demat account operates under one of the two mentioned depositories. In the event that your brokerage firm shuts down, you can still access your shares through the two depositories. In this way, the depositories work towards keeping our investments safe. In order to provide this essential service, the two depositories charge a small fee. This fee is what DP Charges means

Elements of DP Charges

In addition to the depositories mentioned above, the Depository Participant or broker can charge an additional fee. This is primarily because the broker has to pay a number of different fees to the depositories. This is true especially in the case where the broker is charging a lower brokerage fee. There are primarily two elements to DP charges: the depository fee and the brokerage fee, which differs from one broker to another. 

DP Transaction Charges

It's mandatory to pay DP charges in the event that you sell your holdings through your Demat account. CDLS charges Rs. 5.50 on a per company - per day basis. While NSLD charges Rs. 4.50 on a per company - per day basis. Let’s take an example to understand this better.

Example: Investor Y decides to sell one share of company A. If Y has a Demat account with CDLS, he will have to pay Rs. 5.50 to sell one share during a period of one day. If Ram has a Demat account with NSLD he will have to pay Rs. 4.50 to sell one share during a period of one day.

Conclusion

The DP Charges will remain unchanged regardless of the number of shares you sell. So whether you decide to sell one share or a hundred, the depository fee will be charged according to the number of shares sold. In addition to the depository fees, it’s also important to keep in mind that every broker will have their own specific charges. If you are planning on making an investment in the stock market, it’s important to know the different fees and charges that are applicable while trading.

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