Equity delivery is a type of transaction in the equity market. Where people buy shares by paying full payment up front and they can hold on to them for an unlimited period.
In this article, we’ll be learning in detail about various advantages, disadvantages, and charges while taking an equity delivery.
What is equity delivery?
Equity delivery is a transaction wherein an investor buys the share in order to keep the shares for more than one day. The place at which this delivery is received is called the Demat account.
The time taken to complete this transaction is called T+2, where T is the trading day, in other words, the day on which we put up the order in our trading account and 2 means the number of days after which the transaction will be completed.
Equity delivery takes place in the form of a CNC order which is called Cash and carry order is a type of order in the equity segment. Which used in order to take an equity delivery.
Advantages of equity delivery
1. Unlimited holding period.
When an investor buys shares in the form of a delivery transaction he can hold on to them for an unlimited period which is not the case in intraday trading.
2. Pledging of shares
When a stock market investor wants to take a loan and if he has stock holding he can pledge shares with a bank or any other financial institutions which provide this service.
3. Dividend, bonus, and split of shares
When we buy a share in a delivery transaction and keep it in a Demat account we get all the benefits given by the company which includes dividend, bonus, and split of shares.
4. Capital appreciation
As we can hold shares for an unlimited period we get the benefits of the company growth by the way of the share price increase which is also called capital appreciation.
Disadvantages of equity delivery
1. Complete payment
When we buy shares by the way of delivery trade we have to pay the entry-amount at the time of buying the order, unlike trading where one can take leverage which is also called margin, and buy more shares than the current amount present with him.
Read Also: How to calculate the average stock price?
Charges for equity delivery?
This is particularly charge is free with age discount brokers like Uptox, Zerodha, Groww, etc. But some full-service brokers charge a small amount as a charge so an investor should read the offer letter before signing it.
2. Security Transaction Tax (STT)
STT is charged on both the side of the trade i.e. buy as well as sell. It is charged at the rate of 0.1% of the transaction price in a delivery trade.
3. Stamp duty
The stamp duty is charged only on the buy-side of the transaction and it is charged uniformly throughout the country at the rate of 0.015% or Rs. 1500 per crore on the buy-side for delivery trades.
4. Transaction charges
The transaction charges are charged by stock exchanges on both the side of the trade. Transaction charge is charged by NSE (National stock exchange) at the rate of 0.00325% of the total turnover and BSE (Bombay stock exchange) is charged at the rate of a fee of 0.003% of total turnover.
5. SEBI turnover
SEBI turnover is also charged on both the side of the trade i.e.buying and selling of stocks. This expense is charge is equal to Rs 10 per crore of the total turnover.
6. Depository Participant (DP) charges
Dp charges are charged as a fee when an investor keeps a share in the portfolio for more than one day i.e. delivery transactions. This fee is charged while selling shares. Read this article for more details What are DP charges?
7. GST TAX
Gst tax is a compulsory fee levied by the government at the rate of 18% on the total brokerage and transaction charges.
8. LTCG & STCG
LTCG (Long term capital gain) is charged when an investor buys a share in one year and sells in the next year.
In the case of STCG (Short term capital gain), this charge is levied when an investor buys and sells the share in the same year.
Read this article to learn more on tax: Capital gain taxes impact (India)
For more details on charges go to tradebrains.in
Open a free Demat account with Uptox.com
What is equity delivery charges?
Even though brokerage on equity delivery is available for free on most discount brokerage platforms, you have to pay charges like STT, Stamp duty, Transaction charges, SEBI Turnover, DP charges, GST tax, LTCG & STCG.
I (financialwizardindia.com) am not a SEBI registered investment advisor. This article is for information purposes any scheme or company name mentioned here is just for example & not a recommendation.