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# Brokerage and taxes on share tradin

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#### notes

Ex.  Suppose if the face value of the share is Rs.100 and market value is Rs.150. Let the rate of brokerage be 0.5%. What amount should one pay for purchasing 100 such shares ? What amount should one receive after selling 100 such shares ?

Situation (I) At the time of buying shares:
Buying price of 1 share = MV + Brokerage
= 150 + 0.5% of 150
= 150 + 0.75
= Rs.150.75
If someone purchases 100 such shares the total cost is 100 ×150.75 =Rs. 15075.
Here Rs. 15000 is the share price and Rs. 75 is the brokerage paid.

Situation (II) At the time of selling shares.
Selling price per share = MV - Brokerage
= 150 - 5% of 150 = 150 - 0.75
=Rs.149.25.
If someone sells 100 such shares, he will get,
100 × 150 - Rs. 75 = Rs. 14925 after selling 100 such shares.

Note:

• Brokerage is always calculated on Market value of shares.
• In the contract note of sale-purchase of shares, price of one share is shown with brokerage and taxes.

#### definition

Brokerage : We directly can't go to the stock market and buy or sell shares, only the registered members or  organization (agency) of the stock market can buy or sell on our behalf. These members are called 'Share Brokers'. For catering the service of buying and selling of shares they charge some amount which is called ‘Brokerage’ Brokerage is paid on the Market value of the share.

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