Zerodha MTF Charges

MTF charges on Zerodha

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MTF charges on Zerodha (or any broker) consist of several components: interest on the borrowed portion, brokerage on the equity transaction, pledge fees, and various government / exchange charges. This article breaks down the cost structure.

Cost components

ComponentDetail
Interest on borrowed amountDaily; typically 10-14% per annum
Brokerage on the buyZerodha: Rs 0 for delivery (MTF treated as delivery for STT)
STT0.025% on sell
Exchange transaction chargeStandard
GST18% on brokerage + exchange charge
Stamp dutyPer state framework
SEBI feeStandard
Pledge feeRs 30 per pledge instruction
Other regulatory chargesAs applicable

Interest calculation

For a Rs 5 lakh MTF position with 12% annual interest:

  • Daily interest = 5,00,000 x (0.12/365) = Rs 164.
  • Monthly = ~Rs 5,000.
  • Annual = Rs 60,000 (if held full year).

When charged

  • Interest: Daily debit; accrued from buy date.
  • Brokerage: At trade execution.
  • Pledge fee: When pledge is created.
  • STT: On sell.

Comparison with regular CNC

For a Rs 5 lakh CNC delivery purchase:

  • Capital required: Rs 5 lakh upfront.
  • Brokerage on buy: Rs 0.
  • No interest.
  • STT on sell: 0.025% of sale value.

For a Rs 5 lakh MTF purchase (assume 50% borrowed = Rs 2.5 lakh):

  • Capital required: Rs 2.5 lakh upfront.
  • Brokerage on buy: Rs 0.
  • Interest on Rs 2.5 lakh: ~Rs 80/day at 12%.
  • STT on sell: 0.025% of sale value.

For a 1-year hold, interest cost is ~Rs 30,000.

Cost-benefit

MTF makes economic sense when:

  • Expected return exceeds interest cost + opportunity cost.
  • Holding period is short (interest compounds).
  • Specific tax planning benefits.

For long-term buy-and-hold, MTF is generally not cost-effective; the interest exceeds returns over time.

Comparison with Loan against shares

LAS:

  • Different framework; typically lower interest.
  • May require demat holdings already in place.
  • Different regulatory treatment.

MTF:

  • Built-in for new equity buys.
  • Higher interest typically.
  • Streamlined for retail.

For specific needs, compare both.

See also

External references

References

  1. Zerodha, MTF pricing and charges, zerodha.com.
  2. SEBI, MTF framework, sebi.gov.in.
  3. Zerodha brokerage calculator, Full cost breakdown, zerodha.com.

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