Everything You Need to Know About Broker Commission and Fees in Nepal Stock Exchange (NEPSE)

Every time you buy or sell shares via your broker or the online platform (TMS), a small monetary amount is deducted as broker commission and other fees.

Nepal Stock Exchange (NEPSE), Securities Board of Nepal (SEBON), and your stock broker all get their operating capital from the fees and commissions that you pay. That is how they are able to provide a platform to buy and sell shares.

Thus, I assume you do not grumble about paying something which is integral for the investing ecosystem. Furthermore, the broker commission was reduced recently, so you have to pay even less for every transaction.

Breakdown of all fees and commission you need to pay

  1. Broker Commission (0.27% to 0.4% of the transaction amount)
  2. SEBON Fee (0.015% of the transaction amount)
  3. Demat Fee (Rs. 25 for each transaction)
  4. Capital gain tax (5% of the total profit while selling)

1) Broker Commission

NEPSE favors trading of a large number of shares over a small quantity. This is why the broker commission rate is higher for small transaction amounts.

Transaction of shares worth:

A) upto Rs. 50,000: 0.4% broker commission

B) Rs. 50,000 to Rs. 5,00,000: 0.37% broker commission

C) Rs. 5,00,000 to Rs. 20,00,000: 0.34% broker commission

D) Rs. 20,00,000 to Rs. 1,00,00,000: 0.3% broker commission

E) Amount higher than Rs. 1,00,00,000: 0.27% broker commission

The broker commission is levied while buying as well as selling shares. The rates mentioned above was for shares of listed companies. The rates are lower for trading of mutual funds, bonds, and debentures.

2) SEBON Fee

The Securities Board of Nepal (SEBON) is the caretaker and the patrol police of the stock exchange. We can also call it NEPSE’s quality compliance officer. SEBON is responsible to ensure companies and investors play by the rules.

This entity obviously needs resources and funds to ensure a smooth operation of the Nepalese stock market. To fund its activities, it charges a 0.015% fee for every transaction that you make in NEPSE, both during purchase and sales of securities (shares).

3) Demat Fee

The institution from which you make your Demat account is called the Depository Participant.

Every time you buy and sell the shares, the Depository Participant should ensure that the shares that you buy come in your Demat account and the shares you sell go to someone else’s account.

Investors need to pay a flat Rs. 25 Demat fee in every purchase or sale of securities.

4) Capital Gain Tax

As a citizen of Nepal, you have to pay the government a certain amount of tax on every profit you make.

capital gains tax (CGT) is a tax on the profit realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, bonds, precious metals, real estate, and property.

In NEPSE, investors have to pay 5% of every profit they make in stocks. Note that CGT is deducted from your profit, not from your transaction amount.

Note:

  1. The commission and fees are automatically deducted from your transaction amount. You do not have to get into the hassle of paying fees and commission individually to your broker, SEBON, and NEPSE.
  2. Capital Gain Tax is not deducted if you sell your shares at a loss. Also, CGT is not deducted while you buy shares (which is logical).

Let’s finish with a real world example!

Case 1: You buy 10 shares of Company A at Rs. 500 per share

Total transaction amount = Rs. 500 * 10 = Rs. 5,000

a) Broker commission

= Total amount * commission rate for amount less than Rs. 50,000

= Rs. 5,000 * 0.4%

=Rs. 20

b) SEBON Fee

= Total amount * 0.015%

= Rs. 5,000 * 0.015%

= Rs. 0.75

c) Demat Fee

= Rs. 25

Total commission and fees

= Rs. 20 +Rs. 0.75 +Rs. 25

= Rs. 45.75

Total Amount You Need to Pay

= Price of 10 shares of Company A + Commission and Fees

= Rs. 5,000 + Rs. 45.75

= Rs. 5,045.75

Case 2: You then sell the 10 shares of Company A at Rs. 800 per share

Total transaction amount = Rs. 800 * 10 = Rs. 8,000

a) Broker commission

= Total amount * commission rate for amount less than Rs. 50,000

= Rs. 8,000 * 0.4%

=Rs. 32

b) SEBON Fee

= Total amount * 0.015%

= Rs. 8,000 * 0.015%

= Rs. 1.2

c) Demat Fee

= Rs. 25

Total commission and fees

= Rs. 32 +Rs. 1.2 +Rs. 25

= Rs. 58.2

d) Capital Gain Tax

Since you bought at Rs. 500 per share and sold at Rs. 800 per share, you are levied 5% CHT of the profit Rs. 300 on every share

CGT

= Rs. 300 * 5% * No. of shares

= Rs. 300 * 5% * 10

= Rs. 150

Final Amount You Will Get After Selling

= Price of 10 shares of Company A – Commission and Fees – Tax

= Rs. 8,000 – Rs. 58.2 – Rs. 150

= Rs. 7,791.8

Commission and Fees Eat Up Your Profits

Your Gross Profit

= (Rs. 800 – Rs. 500) * 10

= Rs. 3,000 (60% of initial investment)

Your Actual or Net Profit

= Gross Profit – Fees and commission while buying – Fees, commission, and tax while selling

= Rs. 3,000 – Rs. 45.75 – Rs. 208.2

= Rs. 2,746.05 (55% of initial investment)

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