Equity segment on Zerodha

The equity segment on Zerodha is the platform’s largest business line by client headcount and turnover. It covers the buying and selling of equity shares listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) under the cash market (CM) segment. All trades in this segment are governed by the Securities and Exchange Board of India (SEBI) and cleared through NSE Clearing Limited (NCL) and Indian Clearing Corporation Limited (ICCL) for BSE. Settlement since January 2023 occurs on a T+1 basis for most listed equities, meaning shares and funds move between counterparties on the trading day plus one calendar day.

Zerodha operates as a discount broker and charges zero brokerage on equity delivery trades and a flat Rs 20 or 0.03% per executed order (whichever is lower) on intraday equity trades. This pricing model, introduced when Zerodha launched in 2010, became the reference for India’s discount brokerage industry.

Regulatory framework

SEBI oversight

SEBI regulates equity brokers under the Securities and Exchange Board of India (Stock Brokers) Regulations, 1992, as amended. Brokers must maintain minimum net-worth thresholds, segregate client funds from proprietary funds, report positions daily, and submit to periodic inspections. Zerodha holds a stock broker registration with SEBI and is a trading member of both NSE and BSE.

SEBI’s circular SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/655 mandated the shift to T+1 settlement in a phased rollout starting with the bottom 100 securities by market capitalisation in February 2022, reaching the full list of securities by January 2023.

Exchange membership

Zerodha is a member of:

• NSE, Exchange member code 90179
• BSE, Exchange member code 6756
• MCX-SX (now merged into NSE)

Exchange membership requires compliance with circuit breaker rules, margin reporting, and position limits set by the respective exchange.

Depository linkage

All equity deliveries require a demat account linked to either CDSL or NSDL. Zerodha’s in-house depository participant (DP) is CDSL. The DP ID for Zerodha is IN301151 on CDSL. Shares bought in delivery (CNC product code) are credited to the client’s demat account after the T+1 settlement cycle.

Product codes in the equity segment

Zerodha’s trading platform Kite exposes three product codes for equity cash segment orders:

CNC (Cash and Carry)

CNC is the delivery product. Orders placed under CNC do not attract intraday margin requirements. The full order value must be available in the trading account at the time of order placement, though Zerodha does allow a small buffer via the margin available in the account. Shares purchased under CNC are credited to the demat account on T+1. There is no brokerage charged on CNC trades; only statutory charges apply.

Shares held in the demat account can be sold under CNC without any time restriction. When selling, the shares are debited from the demat account on T+1 via a Depository Instruction Slip (DIS) or the CDSL TPIN (Transaction PIN) based early pay-in mechanism that Zerodha mandates.

MIS (Margin Intraday Square-off)

MIS is the intraday product. Positions opened under MIS must be squared off within the same trading session. Zerodha’s system auto-squares off open MIS positions between 15:10 and 15:20 IST on NSE and between 15:10 and 15:30 IST on BSE. Clients who fail to square off manually are subject to an auto-square-off charge of Rs 50 per position in addition to normal brokerage.

MIS positions attract intraday leverage. Zerodha provides up to 5x intraday leverage on select liquid large-cap stocks, subject to SEBI’s framework on enhanced supervision of intraday leverage.

Brokerage on MIS is Rs 20 per executed order or 0.03% of turnover, whichever is lower. This applies per order leg (entry and exit are each one executed order).

CO (Cover Order)

Cover Orders combine a market or limit order with a mandatory stop-loss order placed simultaneously. The stop-loss leg reduces risk exposure, which was historically used to justify higher leverage. Following SEBI’s circular SEBI/HO/MRD2/DCAP/CIR/P/2020/204 (October 2020), which restricted peak margin reporting, CO orders were suspended by most brokers including Zerodha. As of May 2026, CO orders in the equity segment remain unavailable on Kite.

Brokerage and charges

Zerodha’s equity segment charges are structured as follows:

The DP charge of Rs 13.5 is levied by CDSL per ISIN per settlement day when shares are deducted from the demat account, regardless of the quantity sold. This charge is often overlooked by new investors and becomes significant when selling multiple small lots of the same stock on different days.

Margin requirements

For CNC trades, the full order value must be available. Zerodha does not provide leverage for CNC purchases beyond the uncleared balance from recent sales.

From September 2021, SEBI’s Peak Margin framework (CIR/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/583) requires brokers to report the peak margin used by each client to the clearing corporation four times a day. Brokers can be penalised if a client’s peak usage exceeds the collateral provided. This eliminated the informal intraday CNC leverage that some brokers allowed before the regulation.

For MIS trades, Zerodha applies a haircut-based margin. The eligible collateral is the sum of cash in the trading account plus pledged securities (after haircut). Unpledged shares in the demat account cannot be used as margin until they are pledged through the pledge mechanism.

Settlement cycle

India’s equity cash segment moved from T+2 to T+1 settlement in a phased manner mandated by SEBI. The full rollout completed on 27 January 2023. Under T+1 settlement:

• Shares bought today are credited to the buyer’s demat account by the end of the next trading day.
• Funds for shares sold today are received by the seller’s trading account by the end of the next trading day.
• Early pay-in of shares (seller delivering shares before the settlement deadline) is possible via CDSL’s TPIN mechanism, which Zerodha requires for all delivery sell orders placed without prior pledge.

The T+1 settlement reduced counterparty risk in the Indian equity market and aligned India with global best practices. It also reduced the working capital requirement for clearing corporations.

Order types supported

Kite supports the following order types in the equity segment:

• Limit order: Executed only at the specified price or better.
• Market order: Executed at the best available price in the order book.
• Stop-loss limit (SL): Triggered when the price reaches a specified trigger, then placed as a limit order.
• Stop-loss market (SL-M): Triggered at the stop-loss price, placed as a market order.
• After-market order (AMO): Placed outside trading hours; queued for the next session’s opening.
• Good Till Triggered (GTT): Conditional order that remains active for up to one year; placed as a market order when the set price is reached.

GTT orders, introduced by Zerodha in 2019, allow delivery investors to set target and stop-loss prices without keeping the application open. GTT orders are client-side instructions that Zerodha’s backend converts to exchange orders upon trigger; they are not resting orders on the exchange.

Basket orders and smallcase integration

Kite’s basket order feature allows investors to place up to 20 orders simultaneously across different scrips. This is used by investors tracking index compositions or sector baskets. The basket order is not a single exchange order; each leg is sent as a separate order.

Zerodha also integrates with smallcase, a third-party platform that packages thematic equity baskets. Smallcase orders placed via the Zerodha integration are executed as basket orders through Kite.

Sensibull and options integration

While primarily an equity tool, Sensibull (in which Zerodha holds a stake) integrates with Kite to provide analysis and strategy building that spans equity cash positions and F&O segment positions. This is relevant for covered call strategies where an investor holds delivery shares and writes call options against them.

Tax treatment

Short-term capital gains (STCG)

Gains from equity shares held for fewer than 12 months are taxed as STCG at 15% under Section 111A of the Income Tax Act, 1961. This flat rate applies regardless of the investor’s income tax slab.

Long-term capital gains (LTCG)

Gains from equity shares held for 12 months or more are taxed at 10% under Section 112A on gains exceeding Rs 1 lakh in a financial year. The grandfathering rule applies to shares acquired before 31 January 2018; the cost of acquisition is deemed to be the higher of the actual cost or the fair market value as of 31 January 2018. See the grandfathering rule for LTCG article for a detailed explanation.

Intraday profits

Profits from MIS (intraday) trades are treated as business income and taxed at the applicable slab rate. Losses from intraday trading are classified as speculative losses and can be set off only against speculative gains; they cannot be set off against salary income or long-term capital gains.

Securities Transaction Tax (STT)

STT is a direct tax levied at source and is not refundable. It forms part of the cost of acquisition for capital gains calculation when buying shares, but it is not deductible as an expense for intraday or F&O business income purposes under Section 36 of the Income Tax Act (however, SEBI Turnover Tax and Stamp Duty are deductible as business expenses).

Comparison with other brokers

Full-service brokers like HDFC Securities bundle advisory, research reports, and relationship management into their higher brokerage fee. Zerodha provides no advisory or recommendations; all investment decisions remain with the client.

Common operational considerations

CDSL TPIN for sell orders

From July 2020, SEBI prohibited brokers from maintaining a Power of Attorney (POA) for demat accounts in a manner that allows them to debit shares without explicit client authorisation. Zerodha moved to a TPIN-based system where clients enter a six-digit TPIN generated through CDSL’s website or app to authorise each batch of sell orders. This must be done before placing the sell order. If the TPIN is not authorised, the sell order is placed but the delivery obligation cannot be met, resulting in an auction debit.

Auction penalty

When a seller fails to deliver shares by the settlement deadline, the exchange conducts a close-out auction (also called an auction settlement). The exchange buys the undelivered shares in the auction market and charges the seller the higher of the auction price plus 20% penalty or the closing price of the settlement day. The buyer receives shares at the original trade price; the additional cost falls entirely on the defaulting seller.

Liquid bees as margin

Liquid BeES (Benchmark Exchange Traded Scheme, Liquid) units held in the demat account can be pledged to generate margin for intraday trades without selling the underlying. The haircut on Liquid BeES is typically 10%, making it one of the most efficient collateral types after cash. See the pledge and collateral margin article for the full pledge workflow.

References

1. SEBI Circular SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/655, T+1 settlement framework.
2. SEBI Circular CIR/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/583, Peak Margin framework.
3. SEBI (Stock Brokers) Regulations, 1992, as amended.
4. NSE Circular NSE/COMP/47837, T+1 settlement phased rollout schedule.
5. Income Tax Act, 1961, Sections 111A, 112A, and 36.
6. CDSL DP Operating Instructions, TPIN framework for delivery instruction authorisation.