When operating in the stock markets, it is important to understand various charges that can affect your overall trading costs. Depository Participant (DP) charges are one such cost that often goes unnoticed but can impact your net returns. Understanding what DP charges mean and how to manage or minimize them is especially useful for both intraday and delivery-based traders.
What Are DP Charges?
Before exploring how to reduce or avoid DP charges, it’s important to understand what they are. DP charges are fees levied by Depository Participants (DPs), such as NSDL or CDSL, each time shares are debited from your demat account. These charges are incurred whenever you sell shares from your demat account.
Unlike brokerage fees—which vary from broker to broker—dp charges meaning are fixed and non-negotiable, as they are standardized by the depositories.
Whether you sell stocks worth₹10,000 or₹1,000, the DP charge applies per transaction. Typically, these charges range between ₹10 to ₹35 per transaction, depending on your depository participant and broker.
Why Avoid DP Charges?
While DP charges may appear minimal, they can accumulate over time, especially for frequent delivery-based traders. Without actively tracking these charges, they can gradually reduce your effective returns. Hence, experienced traders often look for strategies to manage or reduce this cost.
3 Tips to Avoid DP Charges
1. Intraday Trading
One of the simplest ways to avoid DP charges is by trading intraday, where you buy and sell stocks within the same trading session. Since shares are not actually credited to or debited from your Demat account in intraday trades, DP charges do not apply.
However, intraday trading carries higher risk due to market volatility, so it requires a solid trading strategy and effective risk management.
2. Trading in Futures & Options (F&O)
Another way to avoid DP charges is by trading in Futures and Options (F&O) instead of equities. F&O trades are settled without transferring actual shares in your demat account, so DP charges are not applicable.
That said, F&O trading involves margin requirements and higher risk and is more suitable for traders with a good understanding of derivatives markets.
3. Hire a Zero DP Pricing Broker.
Another good option for doing away with the DP charges in your investment practice is locating a brokerage house that does not support DP charges or has a flat-rate brokerage plan. For instance, some of the discount brokers offer trading plans that either exclude DP charges or charge a lump sum amount per transaction for all those transactions.
Broker study and comparison among them will help you find the best deal for your requirement. Some might offer free delivery trades under certain conditions, as some might prove better for the long-term investor.
Bonus Tip: Limit Selling of Stocks to Minimum
If you follow a delivery-based trading strategy, you can still reduce DP charges by minimizing the number of sell transactions. Instead of executing multiple small trades, try consolidating them. This helps reduce the frequency of DP charges and streamlines your trading activity.
Last Words
The meaning of any charges incurred for a depository is important, as well as their effect on trades, for both new and seasoned investors.
The DP charges may seem a little steep in the end, but they start accumulating above the total profit levels.
Such investments can either be intraday or F&O trading, or under a zero-DP charge broker. All these may significantly reduce or eliminate the DP costs involved.
