Introduction

Contract notes are among the most relevant legal documents available to investors on the stock market. It keeps track of all the transactions at one place along with profit and loss info. In this document, the availability and legality of critical information related to a transaction make it essential for an investor/trader to properly understand the market.

The contract note is the legal record of any trade made by a stockbroker on a stock exchange. It confirms the trade conducted on a specific day, on the client’s behalf, performed on a stock exchange (BSE / NSE). You receive this document from your broker stating the details of shares that were bought or sold through him. The document may also be available in electronic format with a digital signature.

What are the Contents of a Contract Note?

The Contract Note has provides details as prescribed by the exchanges:

  • Name of the Client
  • Address of the Client
  • PAN of the Client
  • Trading Client Code
  • Order Number
  • Trade Time
  • Trade Number
  • Name and Symbol of the security traded
  • Action Carried Out i.e. Buy or Sell
  • Quantity traded
  • Trade Price of the security
  • Closing rate per unit (Only for Derivatives)
  • Total Charges before Brokerage and Statutory levies

The Contract Note also shows the Brokerage applicable to the Client for trades across the various segments, Exchange Transaction Charges which are levied by the Exchanges, STT or CTT, SEBI Turnover Fees & Stamp Duty.

Order No. & Trade No.:

This column accounts for the unique numbers assigned by Exchanges to specific Orders and Trades respectively.

Order Time:

The exact time at which an investors Order was placed on the Exchange is highlighted here.

Trade Time:

The time at which an investors Trade was successfully executed on the Exchange falls under this column.

Example: Suppose, the current price of Reliance Equity is ₹ 2,000 (Last traded price). You placed a Buy Order (Limit Price) for ₹ 1,995 at 10:01:05 am. Your Order got executed successfully at 10:30:27 am. In this case – Your Order Time is 10:01:05 am | Your Trade Time is 10:30:27 am

Securities/Contract Description:

Refers to the name of the stock/contract which was traded.

Buy/Sell:

Simple – Refers to the type of order placed by an investor.

Quantity:

This accounts for the amount of stock an investor trades in. Positive numbers apply to Buy Orders whereas negative (-) numbers apply to Sell Orders.

Gross Rate per Unit:

This rate highlights the price at which an investors order was executed on the Exchange.

Brokerage per Unit:

Brokerage charged for every trade mentioned in Table 2 – Order Wise Details.

Net Rate per Unit:

As brokerage charges are mentioned separately, Net Rate per Unit amounts to the same value as Gross Rate per Unit.

Closing Rate per Unit:

Applicable to Derivative Trades exclusively, this rate accounts for the price at which a particular contract closed for the day.

Net Total Before Levies:

This refers to the total amount prior to other charges being added.

– A positive (+) amount is indicative of an Amount Receivable by You.

– A negative (–) amount is indicative of an Amount Payable by You.

While the 1st table provides you with comprehensive details, the next table – Order-wise Details – is structured to provide you with a simple summary of your trades, along with the brokerage.

Exchange:

This column provides details pertaining to the Exchange and segment that have been traded.

Example – NSE-Capital: NSE refers to the Exchange, while Capital refers to the Equity Segment

Pay In/Pay Out Obligation:

This is the sum of Net Total before Levies (Table 1) and Brokerage charged (Table 2).

– A positive (+) amount is indicative of an Amount Receivable by You.

– A negative (–) amount is indicative of an Amount Payable by You.

Securities Transaction Tax (STT):

This refers to the direct tax levied on every trade made on the Exchange which is collected by the broker and paid to the Exchange. STT is levied on both buying and selling on equity delivery, and on selling on intraday and F&O.

Taxable Value of Supply = Total brokerage + Exchange Transaction Charges + SEBI Turnover Fees.

Total Brokerage– Total Brokerage charged as per your Brokerage Plan

Exchange Transaction Charges–  This fee is levied by Exchanges like the NSE, BSE, MCX and NCDEX in return for enabling trading.

SEBI Turnover Fees– The Securities and Exchange Board of India (SEBI) charges fees on securities transactions for regulating the market.

CGST – Central GST

SGST – State GST

If you are from Maharashtra, CGST + SGST will be levied. For the rest of the country, IGST (Inter-state GST)/UGST (Union Territory GST) will be levied.

Stamp Duty:

This is a Government levy applicable on transfer of securities like shares, debentures, futures and options, currency, and other capital assets.

Auction/ Other Charges:

These charges will be levied to you if applicable.

Net Amount Receivable by Client / (Payable by Client):

The Net Total amount after all levies and charges.

– A positive (+) amount is indicative of an Amount Receivable by You

– A negative (–) amount is indicative of an Amount Payable by You

In case you are looking for Charges related to DP (Depository Participant Charges), Auto Square-Off, Call-n-Trade, Delayed Payment, MTF interest or AMC fees – refer to your Ledger Report.

Importance

As the number of investors in the stock market is rising, chances of fraud and conflicts are also growing day after day. SEBI has taken several measures to safeguard common investor interests. One of the very first moves in that direction is the digital contract note showing the price, brokerage, service tax, and STT in the prescribed format.

Just by looking at this document, an investor can be confident that the order he put through his broker was executed. This paper is a condition for filing a lawsuit or arbitration action against your broker. You should always rely on your broker’s prompt delivery of contract notes.

The fundamental usage of a contract note is:

  • Calculation of total brokerage charged
  • Calculation of capital gains
  • Legal Proof in the case of dispute with the broker
  • Calculation of data for filing the income tax return
  • Cross-examining genuineness of the transactions

When do you get a Contract Note?

A Digital Contract Note generally is processed by the Broker after market hours & is sent via E-Mail to the Clients Registered E-Mail ID. Physical Contract Notes take a lot longer as the Broker has to print & post them.

How do I verify that my Trades were executed on the Exchange?

In order to safeguard investors, all the Exchanges send a SMS with the Turnover to the registered Mobile Number & send an E-Mail with details like Broker Name, Scrip/Contract, Trade Number & Trade Time.

To sum up, contract notes provide investors a summary of their trades made on a particular day. In addition to these trades, they are provided with an overview of their profits and losses. Contract notes are available in an electronic format with a digital signature.

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