How to Read a Contract Note?

Post Date : March 24, 2025

How to Read a Contract Note?

A Contract Note is a legally binding document provided by your broker that details all trades executed on your behalf for a specific trading day. It includes critical information such as trade execution prices, brokerage charges, taxes, and your net obligations (pay-in or pay-out). As per SEBI guidelines, the format of contract notes has been updated from 1 August 2024 (WEB). ensuring greater transparency and standardization.

Key Components of a Contract Note

Here’s a breakdown of the essential columns and terms you’ll find in a contract note:

1. Header Section

• Broker & Client Details: Name, Logo, SEBI Registration No of Broker, Address, and contact information of the broker and client.
• Trade Date: Date of transaction execution.
• Settlement Date: The date when the trade must be settled (T+1 cycle in India).
• Settlement Number: Unique identifier for the settlement cycle.

2. Trade Details

Pay-in/Pay-out Obligation– Negative Value: Pay-in (you owe money) – Positive Value: Pay-out (you receive money).

Charges & Taxes

At the end of the contract note, you’ll find a summary of all charges and taxes:

• Brokerage: Fee charged by the broker for executing the trade.
• GST: 18% tax on brokerage.
• SEBI Turnover Fee: 0.0001% of the turnover (charged by SEBI).
• Stamp Duty: State-specific duty on trades (e.g., 0.003% for equity delivery trades).
• Exchange Transaction Charges: Fee levied by the stock exchange.
• Net Amount Payable/Receivable: The final amount you owe or will receive after all deductions.

Why is Reading a Contract Note Important?

1. Transparency: Verify trade execution prices, timestamps, and charges.
2. Accuracy: Ensure no discrepancies in quantities or brokerage.
3. Compliance: Aligns with SEBI regulations to protect investor interests.
4. Record-Keeping: Essential for tax filing and audit purposes.

Key Changes in Contract Notes (Post-1 August 2024)

• Standardized Format: Uniform structure across all brokers for easier comparison.
• Enhanced Disclosure: Clear segregation of charges, taxes, and obligations.
• Digital Accessibility: Contract notes are now mandatory in electronic format for easy access.

Example: Decoding a Pay-in/Pay-out Obligation

Suppose your contract note shows:

• Net Total Before Levies: ₹-50,000 (Pay-in obligation).
• Total Charges & Taxes: ₹1,200.
• Net Amount Payable: ₹-51,200 (You owe ₹51,200 to settle the trade).

Conclusion

Understanding your contract notes is crucial for tracking trades, verifying costs, and ensuring compliance. Always review it thoroughly to avoid surprises and maintain control over your investments.

Need Help Understanding Your Contract Note?
Contact RMoney’s support team for personalized assistance:

• Phone: 0562-4266600 / 0562-7188900
• Email: askus@rmoneyindia.com

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