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What is a Contract Note?

•6 min read•by Angel One
Understanding how to read a Contract Note is important as it confirms all the information about the trades performed on a specific day. As of mid-2024, SEBI has made it mandatory for brokers to issue a unified contract note with Volume Weighted Average Pr
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Every trade you make leaves a paper trail, and that trail begins with a contract note. This essential document serves as your official receipt and legal proof of all transactions executed through your broker on any given day. Think of it as a detailed invoice that breaks down everything from the securities you traded to the exact charges deducted.  

Understanding your contract note is not just about staying informed; it is about protecting your interests and ensuring complete transparency in every trade you execute in the stock market. In this article, you will learn everything you need to know about contract notes as a retail investor. 

Key Takeaways 

  • A contract note is a legally required broker-issued document summarising all trades executed for a client on a given day.  

  • It contains trade details such as instrument, quantity, price, buy/sell status, brokerage, tax breakdown and net amount due.  

  • Electronic contract notes are valid and permitted. They must include authentication and comply with regulatory formats and record-keeping.  

  • Reviewing your contract note helps detect discrepancies, ensures accurate tax filing and enhances transparency in brokerage transactions. 

What are the Components of 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? 

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 is an account of every trade and transaction made that day. 

  • A contract note acts as a legal record in case of a dispute due to the 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. 

How to Read a Contract Note?

Take a look at what each section means. 

Table 1: For Equity Segment - Trade Summary 

Security Description Section 

  • ISIN 

An 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) 

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. 

  • Total BUY/SELL Value After Brokerage 

This is the total value of the transaction, including the brokerage. 

Net Obligation for ISIN (Before Levies)

  • Net Quantity 

It is the net quantity of shares after adjusting for the buy and sell transactions of a particular security. 

  • Net Obligation for ISIN 

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

  1. 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) Options). 

  1. Buy/Sell

Refers to the type of order placed by an investor. 

  1. Quantity 

This accounts for the amount of stock an investor trades in. 

  1. 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 

  1. 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.  

  1. WAP Per Unit After Brokerage  

This is the WAP after deducting brokerage. 

  1. Closing Rate Per Unit 

The closing price of the derivative contract at the close of the trading day. 

  1. Net Total (Before Levies)

This is the total value of the transaction, including the brokerage, but before adding the taxes. Here, the 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. 

  1. 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 

  1. 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.  

  1. 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.  

  1. 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 + SEBITurnover 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  

  1. CGST 

Central GST 

  1. 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. 

  1. Exchange Transaction Charges

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

  1. SEBI Turnover Fees 

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

  1. Stamp Duty 

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

  1. IPF Charges 

IPF (Investor Protection Fund) or IPFT (Investor Protection Fund Trust) Charges are a fee levied by exchanges to protect investors from any financial misconduct or happening. 

  1. Auction/Other Charges 

These charges will be levied against you if applicable. 

For more details on Charges & Levies – Visit our Transaction Charges Page. 

  1. 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. 

Conclusion 

In the current, quick-paced markets, a clear-cut contract note serves as a receipt and a roadmap to all the trades you carry out. It proves that your broker has done what you asked, presents to you what exactly was purchased or sold and defines all the other costs and taxes. Through a frequent review of your contract notes, you are able to understand the trade prices, commission, charges, and your net receivable or payable. With such transparency, it is easy to notice any discrepancy and your confidence in the trading process is enhanced.  

It is essential to understand how to read a contract note in order to remain informed, compliant and in control. Archive it digitally or as a hard copy so it can be used to file taxes, audit trails and dispute resolution in case of necessity. Lastly, a skilful contract note raises your participation in the market beyond the realms of guesses and guessing to that of good governance, which will then allow you to trade smarter, profit clearly, and plan better. 

FAQs

A stockbroker issues a contract note to the client after the trades have been executed. This legal document works as an official confirmation and legal record of the transactions conducted by the stockbroker on the client’s behalf. It is a mandatory document under the guidelines issued by the SEBI to maintain transparency

A contract note is issued automatically on the registered mobile number and email address. You can also download it from the stockbroker’s app or portal. Since it’s a mandatory requirement, brokers automatically send it once the trade is done on your behalf.

A contract note is given after every transaction and contains details about that transaction. A ledger, on the other hand, is a record of all the transactions - deposits and credits. A ledger has the net balance of your account.   

If you notice any discrepancies or errors in your contract note, contact your broker immediately. Make sure you raise the issue immediately because there’s often a limited period within which the broker will rectify any issues in your contract note. If the issue is still not resolved, you can escalate it to the regulatory body - SEBI.

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