Introduction
This write-up aims to highlight the value of Contract Notes and examines their relevance in the trading world. Understanding how to read a Contract Note is important as it confirms all the information about the trades performed on a specific day.
What is a Contract Note?
A contract note accounts for all successful trades made on a particular day. It serves as legal proof of a given individual’s transactions.
Each contract note is made up of the following components:
- Order & Trade Number
- Order & Trade Time
- Name and Symbol of the Securities Traded
- Action Carried Out: Buy or Sell
- Type of Trade: Delivery or Intraday
- Quantity & Price of the Trade
- Charges Levied: Brokerage & Other Statutory Charges
- Net Amount Receivable / Payable
What makes a Contract Note crucial to you?
- A contract note is an account of every trade and transaction made that day.
By providing customers with a point of reference to compare their trades and transactions against, contract notes increase transparency in the trading process. You can see the specifics on the Contract note sample if you’re curious about why you received less money than you expected for selling your stocks or why you’re being asked to pay more for a buyer than the stock’s current trading price.
- A Contract Note acts as a legal record in case of a dispute due to non-delivery of stocks.
- All brokerage fees and taxes deducted may be accessed in one location
What Purpose do Contract Notes Serve?
- It confirms the trades carried out by an investor on a given day
- Total Brokerage charged can be discerned
- The Net Amount Receivable / Payable is made apparent.
Contract Notes examined with a fine-tooth comb!
Take a look at what each section means.
Table 1: For Equity Segment – Trade Summary
- Security Description Section
- ISIN ISIN or International Securities Identification Number is a unique 12-character alphanumeric code assigned to stocks and bonds.
- Security Name/Symbol Name or symbol of the security being traded.
- Buy/Sell Section
- Quantity This accounts for the amount of stock an investor trades in.
- WAP (Across Exchanges) WAP or Weighted Average Price is the average price at which a particular stock is traded across all the exchanges. It is calculated as WAP = Total buy/sell trade value for the security across exchanges/Total number of shares bought/sold across exchanges.
- Brokerage Per Share/Unit
Here, you can see the brokerage charged to you per share.
- If you have an iTrade Plan, you are charged a brokerage per executed order; therefore, the brokerage per share is mentioned as ₹0. To find your brokerage details, you can check the ‘Order-wise Brokerage Table’ and see that the brokerage charged (for equity delivery) is either INR 20 or 0.1% whichever is lower per executed order (minimum brokerage of INR 2 will be levied).
- If you have a Custom Brokerage Plan, you can see the brokerage per share in the table as applicable to your plan.
- WAP (Across Exchanges After Brokerage)
- Total BUY/SELL Value After Brokerage
This is the WAP after deducting brokerage. Please know that for buy transactions, WAP after brokerage will be positive, whereas it will be negative for sell transactions.
This is the total value of the transaction, including the brokerage.
- Net Obligation for ISIN (Before Levies)
- Net Quantity
- Net Obligation for ISIN
It is the net quantity of shares after adjusting for the buy and sell transactions of a particular security.
It is the net amount after considering all buy and sell transactions and the brokerage charges, but it excludes taxes. Please note that if the Net Obligation is negative, you have to pay; however, if it’s positive, you will receive money. Irrespective of the nature and amount of Net Obligation, it will go to your ledger.
Table 2: For Derivative Segment – Trade Summary
- Contract Description You can view the details of a specific derivative contract, including its underlying asset, contract type, exchange, and expiry date. Here, BF and BT (in brackets) mean brought forward position and bought today, respectively. Note: On Expiry Date, the open positions that aren’t already squared off will be closed based on the closing rate for Futures & Options (for ITM (In the Money) and ATM (At the Money) Option).
- Buy/Sell Refers to the type of order placed by an investor.
- Quantity This accounts for the amount of stock an investor trades in.
- WAP Per Unit It is the weighted average price of the derivative contract being traded. It is calculated as below: WAP = Total buy/sell trade value of a contract/Total quantity bought/sold
- Brokerage Per Unit
Here, you can see the brokerage charged to you per unit.
- If you have an iTrade Plan, you are charged brokerage per trade, therefore, brokerage per share is mentioned as ₹0. To find your brokerage details, you can check the ‘Order-wise Brokerage Table’ and see that the brokerage charged is ₹20 per trade.
- If you have a Custom Brokerage Plan, you can see the brokerage per unit in the table as applicable to your plan.
- WAP Per Unit After Brokerage This is the WAP after deducting brokerage.
- Closing Rate Per Unit The closing price of the derivative contract at the close of the trading day.
- Net Total (Before Levies) This is the total value of the transaction, including the brokerage, but before adding the taxes. Here, value is calculated as below: Buy/Sell Price = Closing Price * Quantity Excluding Taxes
Table 3: Obligation Details
Now, you can see the next table – Obligation Details.
- Exchange This column provides details about the Exchange and the segments 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 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 of equity delivery, as well as on selling in the intraday and F&O segments.
- Taxable Value of Supply
Taxable Value of Supply is the total amount on which GST will be charged. Below is how it will be calculated:
Taxable Value of Supply = Total brokerage + Exchange Transaction Charges + SEBI Turnover Fees + IPFT (Excluding Stamp Duty and STT)
- Total Brokerage – Total Brokerage charged as per your Brokerage Plan.
- Exchange Transaction Charges – Explained Later
- SEBI Turnover Fees – Explained Later
- IPFT – Explained Later
- CGST Central GST
- SGST State GST Note: If you belong to any state where the company is registered, CGST + SGST will be levied. For the rest of the states/union territories, IGST (Inter-State GST) or UGST (Union Territory GST) will be levied.
- 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.
- Stamp Duty This is a Government levy applicable to the transfer of securities like shares, debentures, futures and options, currency, and other capital assets.
- IPF Charges IPF (Investor Protection Fund) or IPFT (Investor Protection Fund Trust) Charges is a fee levied by exchanges to protect investors from any financial misconduct or happening.
- Auction/Other Charges These charges will be levied to you if applicable. For more details on Charges & Levies – Visit our Transaction Charges Page
- Net Amount Receivable/(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
Table 4: Annexure
Here, the annexure provides a detailed description of each transaction.
Table 5: Order-wise Brokerage Details
While the first table provides comprehensive information, this table is structured to give you a simple summary of your trades, along with brokerage details.
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.
To sum up, Contract Notes provide investors with 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.
