Zerodha to Refund DP Charges on Transfer-in of Stocks, Simplifying Investment and Tax Tracking

Zerodha Announces Refund of DP Charges to Simplify Investment and Tax Tracking

Nithin Kamath's Zerodha has made a significant move to simplify investment and tax tracking for its customers by announcing the refund of all depository charges incurred when moving their holdings between two or three demat accounts. This decision aims to make it easier for investors to track their investments and file taxes.

Depository charges are flat fees levied when investors sell shares from their demat account, comprising a fee charged by the central depository, such as CDSL or NSDL, and a broker-specific fee. Investors can claim deductions for such transfer charges when calculating capital gains tax on the sale of shares.

The founder and CEO of Zerodha, Nithin Kamath, believes that the average investor typically has 2-3 demat accounts with holdings spread across them, making it a nightmare to track investments and file taxes. To address this issue, Zerodha will now refund all depository charges incurred by its customers when moving their holdings to the platform.

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Kamath shared a chart showing the monthly net inflows of transferred stock holdings into the platform, which range from Rs 50 crore to Rs 100 crore from October 2024 to May 2026. Notably, the brokerage firm has made most of the platform's brokerage fees on transferred-in stocks free, and the first-year AMC is also free.

By removing depository participant charges for transferring stocks to the platform, Zerodha aims to accelerate a trend already evident in its transfer data. This move is expected to benefit small investors the most, as DP charges can be regressive by design, hitting small retail investors hardest.

According to Diviay Chadha, Partner at the law firm Singhania & Co., "DP charges are regressive by design: a flat Rs 15-20 per scrip is charged regardless of trade value, hitting small retail investors hardest." He explained that these charges are levied per debit instruction, which can silently cost investors Rs 150-300 per event.

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Income tax rules allow investors to claim depository charges as a deduction when computing capital gains on the sale of their shares. However, if DP charges are refunded by the platform or not charged at all, Section 48 tax benefits will not apply when calculating taxable capital gains on stock investments.