Home/Blogs/What Are Turnover Charges

What Are Turnover Charges

24 May 2023

In the dynamic world of India's securities market, SEBI stands as the regulatory powerhouse overseeing its operations. As a participant, whether you are a stockbroker, mutual fund house, clearing member, or any other market entity, you are not exempt from the reach of SEBI's levies. These charges, aptly known as SEBI turnover charges or simply SEBI charges, play a pivotal role in maintaining the market's integrity and sustainability.

What is SEBI?

SEBI, or the Securities and Exchange Board of India, holds a crucial position as the securities watchdog in the country. With its regulatory authority, this organisation plays a vital role in ensuring the protection of investors' interests within the capital and debt securities market. SEBI is also responsible for upholding transparency, fairness, and integrity.

Open Trading Account and Start Trading!

Why Does SEBI Collect Turnover Charges?

To regulate the Indian financial markets in India and carry out its operations and duties, SEBI needs funds. That's why they charge turnover fees to the market participants to cover their operational costs.

What are SEBI's Current Turnover Charges?

SEBI charges two kinds of turnover-fees from the market participants. The rates for debt securities vary from all other kinds of securities. Turnover charges are levied both at the time of buying and selling securities.

Turnover Charges For Securities (Except Debt)

SEBI charges stockbrokers 0.0001% on all securities transactions (except debt instruments).

It means that stockbrokers have to pay:

  • Rs. 10 for every one crore on the buying transaction
  • Rs. 10 for every one crore on selling transaction

The securities on which 0.0001% of transaction fees are levied include:

  • Equities
  • Equity derivatives
  • Agricultural commodity derivatives
  • Non-agricultural commodity derivatives
  • Currency derivatives
  • Business trust and others

Turnover Charges For Debt Securities

The turnover fee SEBI charges stockbrokers on all debt-securities transactions (purchase-and-sale) is 0.000025%.

It means that stockbrokers have to pay:

  • Rs. 2.5 for every one crore on buying transaction
  • Rs. 2.5 for every one crore on selling transaction

SEBI levies 0.000025% turnover charges on these debt securities:

  • Bonds
  • Non-convertible-debentures (NCDs)
  • Other fixed-income securities

How to Calculate SEBI Turnover Charges For a Stock Trader/Investor?

Whether you're an active trader or long-term investor, the rules remain the same. Both parties are subject to a 0.0001% turnover charge on their total turnover, applicable to both purchases and sales. Let's consider an example.

Example:

Suppose you have made three transactions in a month:

  • Bought 1,000 shares of ITC at Rs. 418 per share on Monday at 11 AM.
  • Sold 200 shares of ITC at Rs. 428 per share on Monday at 3:25 PM.
  • Sold the remaining 800 shares of ITC at Rs. 458 after five-days.

This means you have:

  • Made intraday trading of 200 ITC shares
  • Taken delivery of 800 ITC shares and sold them after five-days

Calculation of Turnover Charges:

  • Turnover fee on purchase of 1,000 ITC-shares on Monday = (Rs. 418 x 1,000) x 0.0001% = Rs. 4,18,000 x 0.0001% = Rs. 0.418
  • Turnover fee on selling 200 ITC shares on Monday = (Rs. 418 x 200) x 0.0001% = Rs. 0.0836
  • Turnover fee on selling 200 ITC shares after 5 days = (Rs. 418 x 800) x 0.0001% = Rs. 0.3344
  • Your total turnover fee for the month = Rs. 0.418 + Rs. 0.0836 + Rs. 0.3344 = Rs. 0.836.

How Does SEBI Collect Turnover Charges?

SEBI collects turnover-charges from stockbrokers monthly based on their turnover. As stockbrokers' turnover varies from one month to the other, SEBI's turnover collections also vary.

SEBI also imposes turnover charges on various market participants, including mutual funds and clearing members. These charges are assessed annually, playing a vital role in promoting transparency and upholding regulatory standards. 

  • The turnover fee is charged from mutual funds based on their annual average AUM (Assets Under Management).
  • The turnover fee is charged from the clearing members as a fixed amount, collected yearly.

How are Turnover Charges Paid to SEBI?

Stockbrokers collect turnover charges from clients as per the Contract Note. These charges are then remitted to stock exchanges like NSE and BSE, who deposit them to SEBI. Adherence to regulatory obligations in the trading ecosystem is crucial in this process.

The Takeaway

SEBI serves as the regulatory powerhouse in India's securities market, ensuring investor protection and market integrity. Its collection of turnover charges from market participants, including stockbrokers, mutual funds, and clearing members, plays a pivotal role in funding SEBI's operations. These charges, essential for maintaining transparency and regulatory standards, are collected through stockbrokers and remitted to stock exchanges, ultimately deposited to SEBI.

Checkout more Blogs

You may also like…

Get Exclusive Updates

Be the first to read our new blogs

Intelligent investment insights delivered to your inbox, for Free, daily!

Open Demat Account
I wish to talk in South Indian language
By proceeding you’re agree to our T&C