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In the following subsection we will explain how to calculate brokerage and taxes in share market and also we will mention the strategy and technique which will provide 10% profit in one month and that comes to 120% per year.

**How much profit the trader can make in a month?**

If traders follow a simple strategy called “Take small profits and do multiple trades” which is explained in following example, the traders can easily double money in single year. That is 10% per month equals 120% per year, which is more than double.

**Firstly, let’s brokerage rates and taxes applicable for trading in share market.**

Brokerages charges are commission to be paid for broker for providing services.

Currently due to high competition brokerage rates are very affordable.

Some brokers even offer flat rates like Rs 20 or Rs 30 for one transaction that is for both buying and selling.

Some brokers charge in percentage like 0.03% OR 0.04 % OR 0.05%.

**Suggestion is to go for low brokerage rates with reliable service.**

**Taxes to pay for day trading**

1. The Service tax is 12.36%(12% + 0.24% education cess + 0.12 % secondary and

higher education cess) only on brokerage.(Update Sept 2015)

2. The STT (Security Transaction Tax) is 0.025% only on selling amount.

3. The Stamp duty on total turnover for a day which is 0.002%.

4. Finally you have to pay Regulatory charges on total turnover for a day which is

0.004%

No need to worry much about these taxes as all these taxes will add up to very small amount at the end of the day compared our profits as explained in following sub sections.

Now let’s see how a take a small profit and how it adds to big profit at the end of the month.

If traders follow a simple strategy called “Take small profits and do multiple trades” which is explained in following example, the traders can easily double money in single year. That is 10% per month equals 120% per year, which is more than double.

Brokerages charges are commission to be paid for broker for providing services.

Currently due to high competition brokerage rates are very affordable.

Some brokers even offer flat rates like Rs 20 or Rs 30 for one transaction that is for both buying and selling.

Some brokers charge in percentage like 0.03% OR 0.04 % OR 0.05%.

1. The Service tax is 12.36%(12% + 0.24% education cess + 0.12 % secondary and

higher education cess) only on brokerage.(Update Sept 2015)

2. The STT (Security Transaction Tax) is 0.025% only on selling amount.

3. The Stamp duty on total turnover for a day which is 0.002%.

4. Finally you have to pay Regulatory charges on total turnover for a day which is

0.004%

No need to worry much about these taxes as all these taxes will add up to very small amount at the end of the day compared our profits as explained in following sub sections.

Now let’s see how a take a small profit and how it adds to big profit at the end of the month.

Rate - The stamp duty on total turnover for a day is 0.002% and Regulatory charges are 0.004%.

Stamp duty and regulatory charges are applied on total turnover of a day.

The total turnover is calculated by adding the buying and selling amount happened throughout the day.

In above example the Buying amount is 38,000 and selling amount is 38,150 which adds up to Rs. 76,150

Stamp duty is 0.002% and Regulatory charges are 0.004% which adds up to 0.006%

Rs 35.18 + 4.57 (stamp and regulatory charges) = 39.75 which includes brokerage charges and all taxes.

Conclusion

The trader paid Rs.39.75 (brokerage and taxes) while the profit earned is Rs.150.

So the Net profit is Rs 110.25 (Rs 150 - Rs 39.75)

Rs 110.25 profit is earned by the trader in single trade by investing Rs 38,000

Please Note :-

If the trader increases quantity from 100 to 200 then profit will be doubled to Rs 220 and if trader makes only two trades in a day then profit will be Rs 440.

And this strategy is called as do multiple trades and takes small profits. Taking small profits is suggested because in day trading share prices move in very random fashion and nobody has any control on them so it is wise decision to book profit at smaller rates.

The trader paid Rs.39.75 (brokerage and taxes) while the profit earned is Rs.150.

So the Net profit is Rs 110.25 (Rs 150 - Rs 39.75)

Rs 110.25 profit is earned by the trader in single trade by investing Rs 38,000

Please Note :-

If the trader increases quantity from 100 to 200 then profit will be doubled to Rs 220 and if trader makes only two trades in a day then profit will be Rs 440.

And this strategy is called as do multiple trades and takes small profits. Taking small profits is suggested because in day trading share prices move in very random fashion and nobody has any control on them so it is wise decision to book profit at smaller rates.

Example -

The following example is calculated taking into consideration intraday brokerage rate as 0.03% for buying and 0.03% for selling.

Suppose a trader bought Bharati Airtel at Rs.380 and quantity 100 so the total amount trader has to pay is Rs.380 x 100 = Rs.38,000.

The buying amount is Rs.38,000 (Rs.380 x 100 Qty shares)

The service tax is 12.36%, so 12.36 % for Rs.11.40 comes to Rs 1.40.

Total charges the trader has to pay on buying amount is

The total brokerage + service tax which come to Rs.11.40 + Rs.1.40 = Rs.12.80

Suppose the trader sold Bharati Airtel at Rs.381.5 (profit of small amount of Rs 1.5), Qty - 100 so the amount comes to Rs.38,150 (Rs.381.5 x 100 Qty shares).

So the trader got the profit of Rs 150.

STT (Service Transaction Tax) is only on selling amount. The STT is 0.025%.

The selling amount is 38,150 so the STT comes to Rs.9.53.

Total charges the trader has to pay on selling amount is = Brokerage + service tax + STT

= Rs.11.44 + Rs.1.41 + Rs.9.53

= Rs.22.38

= Rs.35.18

Important note - Rs 1 to 2 movements in share price of Rs 300 to Rs 500 happens very easily through a day.

It is quite possible to get Rs 1.5 profit for Rs 380 share price compared to share price ranged in between Rs 50 or Rs 100. So take share price above Rs 150 and having large volumes so that you can book profit easily and at faster rates.

**Now Let’s see how it will add up to thousands at the end of a month**

In a month there are 22 trading days, (Saturday and Sunday are holiday for share market).

So, let’s take 20 days for calculation.

If the trader increases quantity from 100 to 200 then profit will be doubled to Rs 220 then for 20 days it comes to 4400 profit by investing Rs 38,000

and if trader makes only two trades in a day then profit will be Rs 440 then for 20 days it comes to Rs 8800 by investing Rs 76,000.

**Let’s see percentage wise returns**

Trader earns Rs 4400 profit per month after investing Rs 38,000 so the percentage comes to 11.57% per month profit approximately.

Let’s consider only 10% profit per month and remaining 1.57% for losses per month.

So annually returns comes to 12 months x 10% profit = 120%

Annual returns are 120 % (more than double). Even if you leave 20% as loses then also your money got doubled in a year.

It is quite possible to get Rs 1.5 profit for Rs 380 share price compared to share price ranged in between Rs 50 or Rs 100. So take share price above Rs 150 and having large volumes so that you can book profit easily and at faster rates.

So, let’s take 20 days for calculation.

If the trader increases quantity from 100 to 200 then profit will be doubled to Rs 220 then for 20 days it comes to 4400 profit by investing Rs 38,000

and if trader makes only two trades in a day then profit will be Rs 440 then for 20 days it comes to Rs 8800 by investing Rs 76,000.

Trader earns Rs 4400 profit per month after investing Rs 38,000 so the percentage comes to 11.57% per month profit approximately.

Let’s consider only 10% profit per month and remaining 1.57% for losses per month.

So annually returns comes to 12 months x 10% profit = 120%

Annual returns are 120 % (more than double). Even if you leave 20% as loses then also your money got doubled in a year.

trade goes wrong then trader has to accept losses and come out of trade. Suppose

in worst case scenario Even if you lose 50% loss then also you are getting 50%

returns in a year.

2) Trading on Margin Amount

In the above example the margin amount is not used. Only the available amount is

used.

Margin amount is the extra amount given by the broker to trade for a day.

Margin amount varies from broker to broker but generally broker provides 3 to 4

times margin amount. So if you have Rs 40000

then you can trade with the amount more than 1.5 lakh.

So we advice not to use margin amount provided by broker because if your trade goes wrong then you can take delivery of those stocks and sell later whenever price goes up.

Unless and until you are very experienced trader, don’t use margin amount because it is big risky if your trade goes wrong.

So believe in small and end up the month with big profits.

The strategy and technique which will provide 10% profit in one month and that comes to 120% per year.