What are the charges associated with physical settlement?

So I recently made a thread asking a legit question regarding physical settlement which I hope that by asking helped a lot of people who might have otherwise had doubts. So as it happens, when you learn about something, you begin to ask more and more questions about it and there’s no end to it cause there’s no end to learning itself. So, the query that I have now is regarding the charges associated with the exercising of contracts.

So first of all, let me clarify, I don’t really create unnessary threads if the answer to my query is given somewhere on the Internet. I go through the information available and then, if I still have doubts, I create a thread.

With that aside, there are several queries in my mind.

  1. What are the charges associated with the exercise of the contract itself?

So this obviously is a thing that when a contract gets exercised, some sort of STT is levied depending upon the type of contract. Just for the sake of confirmation I’d like to know what the different STT rates are applicable upon exercising. Plz correct me if I am wrong.

  1. For futures - 0.01% on the entire contract value for long futures contract. For short futures contract, no STT is levied upon exercising as it taken already when he first shorts.

  2. For options - Buyer of options shall pay STT at the rate of 0.125% on the intrinsic value of contract. Seller of options doesn’t pay any STT as he pays when he first shorts.

Also what other charges are associated with exercising of the contract itself. I am asking about the act of exercising itself, not the settlement procedure afterwards. Like is there brokerage or exchange transaction charges or any other charges that are normally taken otherwise. I couldn’t find any concrete information with regards to this.

  1. Is the brokerage of 0.25% on the entire contact value?

So I went through that zerodha’s policy article which explains everything about physical settlement but in that article, it didn’t say that the brokerage charged to settle the contract is on what exactly? I assumed it was on the contract value but when I did the math, this number was coming out to be way too enormous. Like I was surprised that you guys would charge that much brokerage. So let’s get to the calculation I did -

Let’s just say the contract value is 10lacs. Then, a brokerage of 0.25% on the entire contract value would be Rs. 2500. Correct me if am wrong.

If I am indeed right, then I mean, 2500rs brokerage is a really steep price for a single contract. Like look at the range between this rate and the normal rate. From 20rs to straight up 2500rs. Doesn’t it make it kinda hard to break even? You’d need to be in some good profit so as to actually receive anything amountable after paying this much brokerage. Even a 1% profit would have a quarter of it eaten by this rate. While I do appreciate the broker’s efforts of ensuring the prompt completion of the client’s order and everything else that they do, this particular rate to ask for just seems unreasonable I think. Just letting out my feedback.

For physical settlement, all charges are similar to Equity delivery trade, apart from Brokerage. You can check list of charges here.

Yes, the brokerage in on contract value (Strike Price * Lot Size * Number of Lots for Options and Futures Price * Lot Size * Number of Lots for Futures).

As physical settlement carries substantial risk, that is why brokerage is on higher side.

Sorry that didn’t answer the first part of my question. Perhaps you didn’t read through what exactly I am asking about. Look, I am aware of the charges that are incurred because of the settlement procedure. I know they are same taking/giving delivery. I am asking what potentially other charges are there when you let a contract expire. For example, when you let a contract expire, a certain rate of STT is charged on the buyer of the contract. That is one thing. Of course, STT associated with delivery itself is a different thing. You see the contrast here. That’s what I am asking if there are some sort of other charges associated with letting the contract expire.

Other than STT which is charged on ITM Long Options, there aren’t any additional charges for letting your contract expire.