In a post explaining how DP charges work, Kamath said that every time an investor sells shares, the securities are debited from the demat account and delivered to the clearing corporation for settlement. This debit attracts a DP charge, as the broker’s depository participant facilitates the process and bears settlement risk.
At Zerodha, the DP charge is Rs 13.5 plus GST per transaction, which includes a Rs 3.5 depository fee. However, Kamath pointed out that not all brokers follow a flat-fee structure.
Some firms, he said, charge DP fees as a percentage of the sell value. At a rate of 0.04%, an investor selling shares worth Rs 10 lakh would pay Rs 400 as DP charges on a single transaction. In such cases, he argued, the headline promise of low brokerage may be offset by higher back-end costs.
Kamath also highlighted another practice that can increase costs for active traders. Certain brokers charge DP fees on every sell transaction, even if the same stock is sold multiple times in a day. For instance, if an investor sells shares of Reliance four times in a single trading session, the DP charge may be levied four times. At Zerodha, he said, the charge is applied once per stock per day, irrespective of the number of sell transactions executed in that stock.
Live Events
Unlike brokerage, which is prominently displayed during order placement, DP charges are often less visible in the trading interface. As a result, many investors fail to factor them into their overall trading costs. Kamath said these small charges can accumulate over time and materially affect returns, particularly for frequent traders.
Explaining the rationale behind DP charges, Kamath said that each sell transaction requires operational handling by the depository participant. This includes debiting shares from the demat account and ensuring delivery to the clearing corporation for settlement. The depository levies a fee for this process, and brokers typically add a facilitation charge on top to cover operational effort and associated risk.