Understanding DP Charges: Meaning and Amount You Pay

What is DP Charges?

DP charges are the additional charges that Depository Participants levy for the various services extended for managing and maintaining your demat account. You must pay Depository Participant charges in addition to the fees associated with trading or investing through a stock broker in India. Every time you sell shares that you own, you are assessed DP charges.

A debit account is used for holding securities like stocks, ETFs, bonds, or mutual funds digitally. It removes the possibility of loss, theft, or even damage to the physical certificates since the process is done online.

Depository Participants (DPs) provide shareholders with access to the Central depositories like National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) in India. These depositories maintain the securities digitally and help in the transfer and settlement of securities.

What is the Amount You Pay as DP charges?

The DP charge is ₹13 + 18% GST and is charged daily and per stock, regardless of the quantity sold. The charges will be reduced to ₹12.75 + 18% GST if the account's primary (first) holder is a female. It doesn't matter how much is sold; the fees are charged daily and for each stock.

It is noteworthy that the charges taken by depositories are universal for all sell transaction charges. The charges are:

• Demat transaction charges for CDSL: ₹13 more ₹5. 50
• Demat transaction charges for NSDL: ₹13 plus ₹4. 50

Type of Charge	Charges
Account Maintenance Charges	Free for 1st Year From 2nd Year onwards… Non-BSDA Clients ₹ 20 + Tax / Month For BSDA (Basic Services Demat Account) Clients: – Holding Value Less Than 50,000: NIL – Holding Value Between 50,000 To 2,00,000: ₹ 100 + Tax / Year
DP Charges	₹ 20 Per Debit Transaction ₹ 50 Per Debit Transaction For BSDA Clients
Pledge Creation / Closure	₹ 20 Per ISIN ₹ 50 Per ISIN For BSDA Clients
Demat	₹ 50 Per Certificate
Remat	₹ 50 Per Certificate + Actual CDSL Charges

 

DP Charges: Who Levies and Collects Them?

DP charges are recoverable and self-collected by the depository participants. These participants can be banks, brokerage firms, or other financial institutions registered with the central depositories, NSDL and CDSL, for providing dematerialized services to investors.

Every time you open a demat account with a DP, you are bound by the agreement and the fee structure that is charged. The central depositories do not directly impose fees on investors.

They only recover the costs incurred from the DPs for the services rendered to them and the DPs, in their part, recover the costs from the investors. Every DP has its charging system that is fully disclosed to the investors at the time of opening the account with the DP.

Why DP Charges are Levied by Depository Participants?

To recover the costs incurred to offer demat services, depository participants charge DP charges. These costs include:

• Technology and Infrastructure: This involves not only the costs of maintaining existing technology to manage demat accounts but also the costs of developing and improving on existing technology. This includes having secure servers, software, and data storage systems.
• Regulatory Compliance: DPs work under regulations and guidelines specified by SEBI and the central depositories. These costs include the costs incurred in audit, report, and record keeping as required by these regulations.
• Operational Costs: Costs of operation when running a depository participant service include employee salaries, rent of the business premises, cost of utilities, and other incidental expenses.
• Risk Management: DPs require efficient risk management strategies to mitigate risks associated with the investors’ securities and information. This encompasses expenses incurred on guards, insurance and other mechanisms put in place to prevent fraud and loss.
• Customer Support: DP charges are also levied for being able to take and respond to customer inquiries, addressing their complaints, and facilitating their transactions.

Conclusion

DP charges are an integral part of investing with the help of the demat account. Although they may look like additional costs, these charges are essential to the working of the depository system and the preservation of your securities. Therefore, with knowledge of the various elements of the DP charges, investors can be able to compare the fee structure of various depository participants and hence reduce their expenses.