Minimum Brokerage charges for trading by share brokers in India

Published on Monday, November 17, 2014 by Chittorgarh.com Team | Modified on Thursday, July 2, 2015

Most share and commodities brokers in India charge 'Minimum Brokerage', a fee which the trader has to pay in case the total calculated brokerage is below a certain amount.

If the brokerage calculated is lesser then the minimum breakage set by the broker; the broker charges the minimum brokerage fee.

Exception to Minimum Brokerage

SEBI, the market regulator has guidelines about maximum brokerage fee a broker can charge. As per the SEBI Rule 'no broker can charge more than brokerage of 2.5% of total traded value'.

Example of the Minimum Brokerage Fee

ICICI Direct minimum brokerage charge is Rs 35. Let's say that the brokerage charged by ICICI is 0.50%.

• Scenario 1

  Buy 100 shares of a company at the rate of Rs 50 per share; the total brokerage calculated is Rs 25 (100 * 50 * 0.50%). As Rs 25 is less then Rs 35 minimum brokerage; the trader has to pay Rs 35 brokerage to ICICI Direct.

• Scenario 2

  Buy 100 share of Rs 10 each; the brokerage as per ICICI 0.50% is Rs 5 (100*10*0.50%). ICICI charge minimum brokerage of Rs 35 but in this case they cannot charge minimum brokerage as it is higher than 'Maximum brokerage set by SEBI' which is 2.5%. So you pay Rs 25 (100*10*2.5%).

Traditional Vs Discount Brokers Minimum Brokerage Charges

As SEBI doesn't have any guidelines on the minimum brokerage, each broker has their own minimum brokerage charges. In some cases customer can negotiate on minimum brokerage with the broker.

Traditional brokers (i.e. ICICI, Sharekhan, HDFC Sec, Motilal Oswal etc.) usually charge very high minimum brokerage; while most discount brokers (i.e. Zerodha, RKSV etc.) do not charge any minimum brokerage.

Zero minimum brokerage is one of the key features offered by discount brokers.

Challenges with Minimum Brokerage Charge

There are multiple problems with the minimum brokerage charges:

1. Trade in penny stocks becomes very expensive.
2. As the breakeven point moves high; trading in small quantity doesn't make sense.
3. Also the taxes are charged on actual brokerage paid, which is higher when paying minimum brokerage for small transactions. Following are the taxes which are based on brokerage you pay:
   • Service Tax - 12% on Brokerage + Transaction Charge
   • Education Cess - 2% of Service Tax
   • Higher Education Cess - 1% of Service Tax

Example 1:

When trading with ICICI Direct; any trade below Rs 7000 cost very high; As in above examples; In scenario 1, the actually brokerage paid is 0.70% and in scenario 2, the brokerage paid is 2.5% which is extremely high for one side of transaction. Note that if you buy and sell the same quantity, you end up paying 5% of brokerage.

Example 2:

With Zerodha you pay taxes on Rs 6 brokerage. For the exact same transaction you pay tax on Rs 35 brokerage with ICICIDirect. Note that Zerodha doesn't charge minimum brokerage and ICICI charges Rs 35 as a minimum brokerage.

How does minimum brokerage calculated?

Each broker has different way to calculate minimum brokerage fee. There are few common methods used:

1. Flat Fee Minimum Brokerage Per Executed Order

   Brokers like ICICI Direct; HDFC etc. charge flat minimum brokerage i.e. Rs 35 or Rs 25 per executed order.

2. Per Share Minimum Brokerage

   Many traditional brokers charge minimum brokerage by number of shares traded. For example

   Sharekhan: Minimum of 5 paisa to 10 paisa per share
   IIFL Minimum Brokerage: Minimum of 5 paisa per share

   Example:

   In Sharekhan say the brokerage is .03% subject to minimum of 5 paisa per share.

   When you but 1000 shares of company A at Rs 10 per share and sell them on the same day at Rs 11 per share.

   Total Transaction = (1000 * 10) + (1000 * 11) = Rs 21,000
   Actual Brokers (@ 0.03%) = 21,000 * 0.03 % = Rs 6.30
   Brokerage as per Minimum Broker defined by Sharekhan = 2000 Shares * 0.05 = Rs 100

   So Sharekhan charges Rs 100 as a brokerage instead of Rs 6.30; which is way high.

3. Per Contract Minimum Brokerage

   Most traditional broker charges flat rate minimum brokerage per contract for F&O derivative trading in stock, commodities and currency derivative segments.

   i.e. Geojit charges minimum brokerage of Rs 20 per contract.

Minimum Brokerage Explained by Brokers

Here is how some broker explains minimum brokerage charges:

• Minimum brokerage charges by ICICI Direct

  ICICI Direct charges the minimum brokerage fee of Rs 35 per trade or 2.5% of the trade value whichever is lower.

• Minimum brokerage charges by Sharekhan:

  • Brokerage charges For Intra-day Trades

    Sharekhan charges minimum brokerage of 0.1% on the buy side and 0.1% on the sell side for intraday trades. This is subject to a minimum brokerage of 5 paise per share. This means that if the share price you trade in is Rs 50/- or less, a minimum brokerage of 5 paise per share will be charged.

  • Brokerage charges For Delivery Based Trades

    Sharekhan charges minimum brokerage of 0.5% on the buy side and 0.5% on the sell side for delivery based trades. This is subject to a minimum brokerage of 10 paisa per share. Minimum brokerage of 10 paisa per share will be applicable when the share price is Rs 20/- or less.

    Brokerage of Rs 16/- per scrip will be applicable when the total traded value is Rs 3200/- or less in case of sell transaction.

• Minimum brokerage charges by HDFC Securities:

  HDFC charges the minimum brokerage fee of Rs 25 per order (subject to ceiling of 2.5% of total traded value). These charges are applicable for both buy & sell orders.

• Discount Brokers (i.e. Zerodha, RKSV)

  There is no minimum brokerage with most of the discount brokers in India. Low-cost brokers like Zerodha, RKSV have zero minimum brokerage charges.

• Minimum brokerage in Zerodha

  Zerodha do not charge any minimum brokerage. This is one of the best features Zerodha offers.

• RKSV minimum brokerage

  RKSV, the popular discount broker also doesn't charge minimum brokerage.

• Trade Smart Online (TSO)

  Unlike most discount brokers, TSO, the discount broker offering Rs 15 per trade plans, charge Rs 15 per trade as minimum brokerage. This is an exception in discount brokers offering in India.

No Minimum Brokerage Trading / Account in India

Discount brokers offers 'no minimum brokerage' trading in India. They are no minimum online brokerage firms.

This gives huge advantage to traders who are interested in frequent trades in small quantities for a little margin. Also this makes it possible to trade in penny stocks.

Are you paying high minimum brokerage? If answer is Yes; then you should visit our brokerage comparison page and look for column 'minimum brokerage' for more information about no minimum brokerage trading.