Last Updated: Mar 21, 2024 Value Broking 8 Mins 3.0K

When you enter the stock market as a new investor, you may realize that you are still oblivious to how the stock market works in many ways. You are yet to discover many concepts and segments in the market. In fact, you may start encountering new terms as soon as you open your trading app. For example, an investor may first learn about the derivatives segment only after exploring their trading app or after making their first investment.  Likewise, an investor is likely to encounter terms and concepts like bull runs, bear runs and relative strength only after opening their trading accounts. 

These terms and concepts may sound complex, but learning and fully comprehending them will surely make you a better investor in the stock market. However, as you may know, almost every investor knows they have to buy low and sell high. Although when they sell their stocks and check their transaction statement, an investor may be slightly puzzled to see an additional fee levied on their transaction. This additional fee comprises the DP charges, and this article will help you understand what DP charges mean in stock trading. Unlike the other terms and concepts mentioned above, the term DP charges are fairly easy to comprehend. 

To understand what the term DP charges means, it is first necessary for you to know the full form of DP. The abbreviation DP stands for Depository Participants. Now, the question you might have is what is a depository and what are depository participants. You may already know that to invest in the stock market online, you need to open a demat account. A depository provides these Demat account services to investors in the stock market. However, they provide these Demat services through an intermediary. 

That intermediary is the DP or DP participant. You may visit the website of a DP participant to open a Demat account. These depository participants are financial institutions that are members of the depositories. They mainly include institutions like commercial banks and stockbrokers. Now that you know what depository participants are, we can finally move to DP charges or the depository participant charges.

DP Charges Meaning

DP charges or Depository Participant charges are only levied when you sell shares from your Demat account. DP charges are charges levied by the depositories as well as the depository. A portion of the fee goes to the depository and the remaining goes to the depository participant. It is a fixed charge you have to pay per transaction basis when you sell shares in your Demat account. However, these charges may vary from one depository participant to another. This charge does not depend on the number of shares you sell per transaction. DP charges are not levied when you buy shares and have them delivered into your Demat account. You need to note that these depository charges will be levied regardless of whether you are selling your shares for a profit or loss. 

An Example of How DP Charges Work

Let us assume you buy 10 shares of TCS and 10 shares of Reliance Industries. The next day, you see another buying opportunity and buy 10 more shares of Reliance Industries. In all the above cases, there will be no DP charges since all of the above-mentioned orders are buy orders. However, after a few days, you decide to sell 10 of your Reliance Industries shares, you pay the DP charge of amount X. Whereas, after a couple of weeks, you sell the remaining shares of Reliance Industries. And along with that, you even sell all of your TCS shares. In these cases, you pay amount X on each transaction.  

If you consider this entire event, all in all, you would have to pay DP charges X thrice. That is, you pay X amount each on all three transactions. In the event, you sold all of your Reliance Industry shares in a single order, you would have to pay the same amount X. So in the second event, all in all, you would be paying the DP charges of amount X Twice. That is, once when you sell your TCS shares, and then when you sell all the 20 shares of Reliance Industries in one go. 

Types of DP Charges:

Account Opening Charges: This is a one-time fee charged by the Depository Participant (DP) for opening a new demat account.

Annual Maintenance Charges (AMC): It is a recurring fee charged by the DP for maintaining the demat account on an annual basis.

Transaction Charges: DP may levy charges for various transactions such as buying or selling securities, transferring securities, pledge creation, and closure of demat accounts.

Dematerialization Charges: When converting physical share certificates into electronic form, dematerialization charges are levied by the DP.

Rematerialization Charges: These charges are applicable when an investor requests the conversion of electronic securities back into physical certificates.

Courier Charges: DP may charge for sending physical statements, contract notes, or any other documents related to the demat account through courier services.

Why are DP Charges Levied?

Depository participant charges are a revenue source for the depository and its participants. This charge is a major source of income for the depositories, which take a certain % of it. The Depository takes its portion of the fee for storing your shares. The stockbroker or depository participant takes the remaining amount that makes up the DP charges. This is because in order to become a depository participant the stockbroker has to incur several costs. The primary cost is the depository’s membership fees, which can range from Rs.100,000 . Another cost also tagged along with this membership fee to attain the label of depository participant. 

Along with these charges for DP, the broker may charge various fees. Those other fees include Demat account opening fees and annual Demat account maintenance fees. A brokerage charge is another type of charge levied by stockbrokers on every transaction. However, due to intense competition among stockbrokers to win more accounts, many depository participants let users open Demat accounts for free. Likewise, the depository participant or stockbroker may not even charge the annual Demat account maintenance fee. Whereas a discount broker does not impose brokerage charges as well. Hence the depository participant or stockbroker also takes a portion of the DP charges. However, a depository participant can also charge additional brokerage fees, as well as account opening and maintenance fees.  

What are DP Charges Elements?

The two depositories in India take a fixed portion in the DP charge. 

  1. Demat transaction charges applied by NSDL:- Rs. 4.5/-
  2. Demat transaction charges applied by CDSL:- Rs. 5.5/-

Apart from the fixed fee of the depositories, the stockbroker, who is the depository participant, also gets to decide their share from the total DP Charges. Which is why the total depository charges may differ from stockbroker to stockbroker. So any amount you pay outstanding of these values goes to the DP. The DP with whose help you carry out trading might have a fixed amount above the mentioned values.

You can check how the DP charges every depository participant or stockbroker by contacting them. This information should also be available on the website of the depository participant or stockbroker. However, you must not confuse the DP charges with the other charges like government charges, exchange fees, or brokerage charges. You might also come across a broker who may not impose DP charges directly or may not have any portion of the fee to themselves. You may see this in the case of some full-service brokers. This is because full-service brokers generally charge high brokerage charges. The DP charges are indirectly charged through the brokerage imposed on a transaction. 


Now, after reading this article, you know what DP charges are in context to the stock market. If you are planning on opening a Demat account, you should check the depository charges of the stockbroker. Whereas if you are already an investor in the stock market, you now know that every time you sell stocks from your Demat account, you have to pay the depository participant charges. It is true that learning the DP charges meaning and understanding what DP charges are will not help you construct an ultimate trading strategy. It may neither affect your trading strategy since DP charges may seem like a small charge to many investors. 

Nonetheless knowing that these depository participant charges exist will make you a more informed and knowledgeable investor. Knowing about the DP charges will help an investor calculate the true price at which they would need to sell their shares to break even. An investor who is aware of the DP charges will not scratch their heads when they see additional charges on the transaction receipt. Neither will they feel something is off with the system when they take a look at their profit and loss statement.

Frequently Asked Questions (FAQs)

A depository is an entity responsible for maintaining and ensuring the safety of Demat accounts. In India, there are 2 Depositories, National Securities Depository Ltd. (NSDL) and Central Depository Services Ltd (CDSL). They also act as clearinghouses, ensuring all transactions are carried out without any flaws.

Choosing the right stockbroker for you can be a crucial step in attaining financial freedom. They are the links that connect you to the depository like the CDSL and NSDL. So the first thing you want to make is that the stockbroker you select is a registered depository participant. Then, you should consider the factors and accordingly select the best stockbroker.

You should check and compare the DP charges of different stockbrokers, but should select the broker solely based on these charges. You should also compare other charges imposed by the broker with other brokers. Apart from this you should even look and evaluate all the features and services the stockbroker offers.

The Depositories take a portion of Depository Participant charges while the remaining goes to the Depository Participant. Apart from maintaining Demat accounts, Depositories also behave like clearinghouses. They are responsible for settling transactions.

Therefore, they ensure that no errors occur in transactions. A part of the DP that goes to the Depository gets utilized for this purpose. The other chunk goes to the Depository Participant. They use this money to pay membership fees to the depositories. A member is required to open a Demat account with a depository; without the membership, you will not provide Demat account opening services.

Discount brokers offer their services for very pocket-friendly rates. They impose zero brokerage or charge very little brokerage compared to full-service brokers. The DP charges are a vital source of income for discount brokers to manage their operations. This is why these discount brokers have higher DP charges compared to most full-service brokers.

You need to keep in mind that you only pay DP charges when you sell the stocks in your Demat account. So, if you trade intraday, there is no delivery of stocks in your demat account. So you do not have to pay DP for selling your intraday positions. Likewise, if you are trading in segments like futures and options you also do not have to pay DP charges, as long as you do not opt for the delivery of shares.

To avoid or minimize DP charges, investors can consider the following:

  • Opt for a demat account with a low or no AMC.
  • Choose a DP that offers competitive transaction charges.
  • Keep the demat account active by conducting regular transactions.
  • Consolidate holdings into a single demat account to reduce AMC charges.

The DP charges in Zerodha and Groww may vary, and it is advisable to check their respective websites or contact their customer support for detailed information about the specific charges levied by each platform. DP charges may include AMC, transaction charges, and other applicable fees.