Contract note is a legal document which every stock brokers issues to their investors who invest into shares or other listed securities through them.
In normal trading cycle, when an investor wishes to invest or sell securities he contracts a stock broker. A stock broker acts as an intermediary between stock exchange and investor – he takes order from the investor and make transactions on behalf of the investor for which he charges some amount which is called as brokerage.
So the answer to your question i.e ‘What is Contract Note?’ is it is a receipt which broker issues to the investor informing or confirming about the the trade with complete details of the transaction in a prescribed format by BSE/NSE.
Why Do We Need To Obtain Contract Note From The Broker?
- Using your contract note you can cross check the details of the transaction on the BSE/NSE official website to verify the genuineness of the document issued by the broker.
- Being a legal document contract note helps you file complaint against your broker in case of any dispute or fraud.
- You can calculate total brokerage charged by the broker with the help of contract notes.
- Contract notes provides you data for filing your income tax return like your capital gain/loss for the financial year, with proof.
How To Get Your Contract Note?
Online Purchase :- You get your contract note via email on your email account in electronic format automatically after making your transaction.
Offline Purchase :- Your broker send your contract note on your email account in electronic format or you can ask your broker to give you a copy of the same signed by the trading member or an authorized signatory.
What All Needs To Be Verified In the Contract Note By the Investor?
To make sure that the contract note issued by the broker is valid, investor should verify following details:-
- The contract note should be in a prescribed format
- Name and address of the trading member
- The SEBI registration number of the trading member
- The trade price should be shown separately from the brokerage charged.
- Signature of authorized signatory (in case of other than electronic format) and the arbitration clause stating that the trade is subject to the jurisdiction of Mumbai must be present on the face of the contract note.
- Details of trade, including
- order number,
- trade number,
- trade date and time,
- security name,
- number of units (quantity),
- per unit cost,
- brokerage on deal,
- total value of the deal
- tax, charges, or duty paid on the deal