Delivery Trading & Charges

What is Delivery Trading? What are the Brokerage Charges for Delivery Trading?

Trading and investing in the stock market comes with the journey of entering into various types of trading activities. Intraday trading, BTST trading, and Delivery-based trading are the popular techniques that traders use to trade in the stock market.

Whenever you trade, you have to pay certain brokerage charges on each transaction of buying or selling of the shares in the market. Based on the types of trading like intraday or delivery, the brokerage charges are applicable. Today we are going to talk about Delivery trading, its benefits, and what are the brokerage charges for delivery trading.

Topics Covered :

• What is Delivery Trading?
• Some of the Benefits of Delivery Trading
• Disadvantages of Delivery Trading
• Brokerage Charges for Delivery Trading
• Brokerage and Other Charges
• Lowest Brokerage Charges for Delivery Trading
• Summing-up

What is Delivery Trading?

Delivery trading involves receiving the shares into your demat account with a transfer of ownership to hold for two or more days like weeks, months, years, or as many days as you can hold. There is no limitation to sell the stocks you hold in your demat account, but after buying, once you receive the shares in your demat account, it is called delivery trading.

Unless you receive the ownership after the transfer of shares in your demat account, it is not considered delivery trading. Another key feature of delivery trading is if you don’t have capital, you cannot buy, and if you don’t have shares in your demat account, you cannot sell them. Hence, at the time of placing delivery-based trading orders, your funds are frozen in your trading account, and when you sell them, shares are blocked.

Some of the Benefits of Delivery Trading

Compared to intraday, delivery-based trading comes with certain advantages that make it popular among long-term investors. If you are looking to trade with delivery shares, you should know what the advantages of delivery-based trading are.

Ownership of Shares

One of the advantages of delivery-based trading is that when you buy shares and get credited into your demat account, you become the owner of that much quantity of shares. And you have voting rights in the company’s meetings resolution. And with the ownership of shares, you can take a loan or pledge against borrowing from your brokers.

Long-term Capital Gain

After taking delivery of shares into the demat account, when you hold the shares for a few months or years, you can enjoy the benefit of long-term capital gains. In the long term, the share price increases after absorbing the ups and downs, giving you lucrative returns, making your delivery-based trading highly profitable.

Low Risk of Losses

In short-term trading or intraday trading, the risk is very high. If the stock price does not move as per your expectations or goes in the opposite direction, you can incur losses. In short-term or intraday trading, you have a limited time period to exit from your trade position. While in delivery-based trading, you can hold shares till they become profitable with no risk.

High Returns on Investment

Apart from making a profit in the shares in the long term, when you hold shares in your demat account, you also get the dividend declared by listed companies from time to time, like quarterly or annually. Adding these dividends income with a capital gain, when you calculate the overall return on investment, it will be high compared to short-term trading.

Disadvantages of Delivery Trading

One of the biggest disadvantages of delivery-based trading is that you have to pay a full upfront payment at the time of purchasing the shares. Moreover, you also have to pay higher securities transaction tax (STT) and other charges on delivery-based trading.

And finally, one of the biggest disadvantages of delivery-based trading is you have to pay higher brokerage charges compared to intraday trading. Your broker has to be involved in sending your contract or trade notes, then make sure from DP that you get the delivery of shares into your demat account timely, and because of such extra activities, brokerage is high.

Brokerage Charges for Delivery Trading

In India, the brokerage charges for delivery-based trading may vary from broker to broker. A few years back, when only full-service brokers were active in the market, the brokerage was high, but now, thanks to digital platforms, discount broking services are available in the market at low cost.

However, thanks to discount brokers and stiff competition, the brokerage charges for delivery are also very low and affordable, making it difficult for investors to choose the right broker with the lowest brokerage charges. Let’s find out the brokerage charges.

Recommended Read: Low Brokerage Charges

Brokerage and Other Charges

When you buy or sell in the stock market, there are various charges levied along with the brokerage fees. The charges include the transaction charges, GST, STT/CTT, Stamp Duty, and SEBI Charges. Some of the charges like GST, and SEBI Charges are fixed, while Stamp Duty varies from state, and STT/CTT may vary as per the types of security.

However, the transaction charges depend on the exchange, while the brokerage charges depend on broker-to-broker. Some of the brokers charge zero fees on delivery trading, but you have to pay other charges as discussed above. Some of the brokers charge between 0.05% to 0.1% on the value of the transaction in delivery-based trading.

Despite competition, many discount brokers and full-service brokers also charge Rs 20 or 2.5% (whichever is lower) per executed order on delivery. These are the minimum and maximum brokerage charges that a broker can charge from its clients. To know the brokerage charges of different brokers, you can visit their website and check the pricing.

Lowest Brokerage Charges for Delivery Trading

The lowest brokerage charges on delivery could be zero brokerage that some of the selected discount brokers and full-fledged brokers charge. However, they might charge in other ways, like levy charges on demat and trading accounts or annual trading platform fees, etc.

Hence, understanding and making clear all types of charges, including brokerage charges and any other hidden charges, is necessary to avoid any misunderstanding between the broker and client. The lowest brokerage for delivery trading is Rs 20, which you might be asked to pay on each executed order, the amount or quantity doesn’t matter.

Summing-up

Delivery trading in the stock market is when you are ready to take the delivery of shares into your demat account. After placing the orders, as per the T+2 trading cycle, the shares will be credited into your demat account showing quantity and market price.

You have ownership of shares with voting rights, with entitlement to get a dividend and the benefit of long-term capital gain if you hold the shares for the long term.

However, owing to the involvement of transfer of ownership processing and demat account maintenance cost, the brokerage charges on delivery trading are high compared to intraday and F&O segments. But you can choose the right broker offering the lowest brokerage charges on delivery trading or in other segments to make your trading journey cost-effective.

Recommended Read: What are tax implications on Demat Account