Zerodha is known for its minimum brokerage and advanced trading platform. But do you know that not following norms of maintaining sufficient balance or margin in the trading account, can actually lead to a penalty? So, what are Zerodha’s penalty charges?
In this article, we will check in detail the penalty fees charged by a broker in different circumstances.
Peak Margin Penalty Zerodha Charges
Now when trading using Zerodha Kite, it is important for every trader to execute the minimum balance. It is something like maintaining a minimum amount in your bank account.
Failing to do so makes you liable to pay penalty fees and none of us like to pay any kind of extra fees or charges.
So, in order to prevent yourself from such conditions while trading using Zerodha demat account, keep a check on when and how much the broker can penalize you.
There are two different types of margins in the share market:
Upfront margin penalty
Non-upfront margin penalty
Upfront Margin Penalty
This margin penalty is charged on the broker by the exchange when the broker allows its trader to open a trade position the value of which is more than the amount in the trading account.
Let’s comprehend this with an example.
Assume you have Rs 2 lakh in your trading account and the brokerage service permits you to open a trade with a minimum margin (SPAN+Exposure) of Rs 2.1 lakh.
In this circumstance, there would have been a shortage of Rs 10,000, which would lead to a penalty on the broker.
Non-Upfront Margin Penalty
This is another margin penalty that is charged to the trader when he or she fails to maintain a minimum amount in the trading account post position.
To understand this consider the future trade where the losses are settled every day. Here if the loss amount is not available in the trading account then the trader is provided with T+1 day to add funds.
Failing to do so makes the trader liable to pay penalty charges. This type of charge is called a non-upfront margin penalty.
Here is the detail of the penalty charged by Zerodha:
Zerodha Margin Shortfall Penalty Charges
<₹1 lakh or 10% of the margin required
>=₹1 lakh or >=10% of margin required
Let’s suppose your account is shortfall by ₹50,000 then the penalty charged would be:
Here the 18% GST is charged separately from the penalty cost.
You can check this penalty cost in your trading account on the T+6th day.
*If the margin shortfall occurs for three consecutive days then the penalty would increase to 5%. *A shortfall more than 5 times in a calendar month, makes a trader liable to pay a penalty equal to 5% on the further shortage in the non-upfront margin. *In the case of commodity trading, if margin shortfalls 3 times (consecutively or three times in a calendar month) are reported in MCX then 5% penalty would be charged from 4th shortfall onwards.
Zerodha Intraday Margin Penalty
In Zerodha intraday trading, one has to add and maintain a sufficient margin while taking a short position in the trade. Here the rule is the same where you have to maintain a required non-upfront margin in case the value of shares increases.
In case, there is a short fall in margin, Zerodha charges a penalty cost as discussed above.
Further, there are Zerodha auto-square-off charges which are charged on both long and short positions intraday if the trader fails to close the position before the square-off time.
Here is the detail of auto-square off charges in Zerodha:
Zerodha Auto Square Off Charges
Auto Square Off Charges
₹50 per order
Auction Penalty Charges Zerodha
Next, we move on to, BTST penalty charges. Let’s recall BTST or buy today sell tomorrow trade in brief.
In BTST trade shares are purchased and sold on the next trading day prior to settlement and delivery into your Demat account. In this charges for BTST in Zerodha is nil but to complete the sell order the next day, where you place a trade to sell shares that are not yet delivered to you.
So you are totally dependent on the seller from whom you purchased the shares to hand over the stock to you.
Here, if your seller defaults in delivering shares then you as a second seller have to face the auction penalty charges for short delivery.
Auction penalty charges can be up to 20% of the total amount of the share short-delivered and are settled in cash.
How to Check Penalty in Zerodha?
If you are liable to pay Zerodha penalty charges or the broker has deducted it from your account, then you can check the details in Console.
Login to Zerodha Kite or directly to Console.
Click on Funds.
Now click on View Statement.
Under this, you can check the margin penalty (non-upfront) with date detail.
The penalty charges are reported on T+5 days and hence entered in the statement on T+6th day.
You may find it simpler to avoid these penalty costs now that you understand all of the penalties imposed by the Zerodha. You just need to ensure that you have the necessary balance in your brokerage account while trading.