# How To Calculate Brokerage In Share Market

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• 17 Sep 2023

The brokerage fee is charged by the broker when you buy or sell shares on their platform. A brokerage fee is necessary for the stockbroker to fund their operations.

However, SEBI (Securities and Exchange Board of India) has specified the maximum brokerage that a broker can charge. SEBI states that brokerage fees should not exceed 2.5% of the total value of the transaction done by the client. Therefore, a broker cannot charge more than 2.5% brokerage. Now, let’s understand how to calculate brokerage fees. Moreover, the brokerage fee depends on the type of broker i.e full-service broker and discount broker and other factors.

In India, there are primarily two types of brokers:

Full-Service Brokers: These brokers offer a wide range of services related to securities trading, including research, sales management, and advisory services. As a result, their charges tend to be relatively higher.

Discount Brokers: Discount brokers mainly provide a trading platform and charge a significantly lower brokerage fee. They typically impose a flat rate, regardless of the trade's value or size.

It is important to remember that brokerage charges apply to both buying and selling shares. In some cases, brokers may charge a fee only once, regardless of whether you buy or sell. If you are wondering how to calculate brokerage in the stock market, this example will help.

Suppose a broker charges a fee of 0.05% for intraday trading. Then, here's how to calculate brokerage fees:

The brokerage fee is 0.05% of the total turnover. Let's say you buy a stock worth Rs 100. In this case, the brokerage fee is 0.05% of Rs 100, which amounts to Rs 0.05. So, the total brokerage fee for both buying and selling would be Rs 0.05 + Rs 0.05, which equals Rs 0.10

The brokerage you pay depends on the total cost of the shares and the agreed-upon percentage. Here's how to calculate brokerage in the share market:

• For intraday trading at a rate of 0.05% or flat fee depending upon broker whichever is lower, here is how to calculate brokerage fee: Market price of 1 share *number of shares * 0.05%.

• For delivery trading at a rate of 0.50%, here is how to calculate brokerage: Market price of 1 share * number of shares * 0.50%.

As the competition among brokers is getting tougher, the charges are getting more reasonable, which can be good news for investors.

The calculation of brokerage depends on the following factors:

One of the main factors determining brokerage is the price at which you buy or sell a single security unit. The brokerage is directly linked to this price.

2. Volume Of Transaction

Another significant factor influencing brokerage, whether calculated manually or using a brokerage calculator, is the volume of your transactions. Generally, larger transaction volumes result in higher brokerage amounts. However, some brokers may reduce the percentage commission for investors who trade in large quantities.

3. Useful Tips

Once you've made your choice of broker, it's crucial to verify that the brokerage they apply to your transactions aligns with the agreement you both made. Additionally, keep an eye on the brokerage charges applied at regular intervals.

Another thing to be aware of is the "Annual maintenance charges" (AMC) deducted by the broker from your account. Make sure to inquire about these charges as well. If the AMC charge is deducted every month, it can significantly reduce your invested funds over time. In such a situation, it might be more cost-effective to pay a lump sum amount upfront to nullify the monthly AMC charges.

### Conclusion

Brokerage charges are the fees you pay to a broker for their services. Brokers charge these fees to generate income for themselves. As a trader, you have several broker firms like Kotak Securities which offer hassle-free trading. The brokerage fee depends on the type of broker you select. Discount brokers charge low fees, whereas full-service brokers charge high. The reason brokers charge brokerage fees is to cover the costs of facilitating your trades, providing research and analysis, and earning a profit for their services.

## FAQs On How To Calculate Brokerage

The brokerage is calculated on the market value of shares.

You can save money by using a discount broker if you are a self-directed investor or trader. A discount broker charges a fixed fee per trade or a percentage of the transaction value, which is lower than the charges of a full-service broker.

Full-service brokers charge higher brokerage fees because they offer a wider range of services like investment research.

To execute transactions or use the specialized services of the broker, you need to pay a brokerage fee.

A brokerage calculator provides you with exact numbers so that you can understand the charges you might incur when making a trade.