How to Calculate Brokerage? Formula & Best Example 2021

When trading stocks, there are a variety of charges to consider. Security Transaction Tax (STT), service tax, stamp duty, brokerage charge, and a variety of other fees are among them.

The brokerage charge and STT are the most popular charges among the various fees. Let’s discuss what is brokerage charge, how to calculate brokerage & types of brokers:

What are Brokerage charges?

Brokers are the intermediaries who help investors in buying and selling stocks, futures, options, and other financial instruments. Brokerage charges are the fees collected by a broker in exchange for the assistance they provide.

As you cannot directly deal with exchanges like NSE & BSE, brokerage firms are the only option you have to buy & sell stocks on Indian Exchanges.

Types of Brokerage

There are two different kinds of brokers, and the brokerage charge is determined by which one you select.

Full Service Brokerage firm

These are classic brokers, and their services comprise stock, currency, and commodity trading support. They conduct research on your behalf, manage your sales and assets, and offer expert advice.

They also offer you banking assets. On both intraday and delivery trading, full-service brokers charge 0.05 percent to 0.60 percent commission.

Discount Brokerage Firm

You can choose a discount broker’s extremely quick operational platform to trade stocks and commodities. Their fees are smaller, and they don’t offer any financial counselling.

In the event of intraday and delivery trading, these firms charge a fixed fee per deal (a flat fee of INR 10 or INR 25). For delivery trading, several of these brokers do not impose any fees.

There are three types of brokerage plans available in India:

• Commission based on a percentage of trading volume.
• A per-trade fee for a flat brokerage.
• An limitless monthly trading package

How to Calculate Brokerage?

It’s important to realize that a trade fee must be paid both when buying and selling a stock. Some brokerage may be exceptions to this rule, in that they only charge a fee once, for either purchasing or selling.

If you’re not sure how to calculate brokerage in the share market, this example will help you out.

Assume that a broker charges a 0.10 percent fee for intraday trading. This translates to a brokerage fee of 0.10 percent of total turnover.

Let’s say you spend INR 200 on a stock. Then there’s a brokerage fee of 0.10 percent of INR 200, or Rs 0.20. The total brokerage fee for the transaction is then Rs 0.20 + 0.20, or Rs 0.40. (for purchasing and selling stocks).

Originally published at https://profitmust.com on November 9, 2021.