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How to Calculate brokerage and taxes in Nifty future trading and find profit
In the following section we will explained how to calculate the brokerage and taxes in nifty futures trading and how profits are generated. What is the amount required to start trading in Nifty future contract?Nifty future trading happens in lot and one lot consist of 75 quantities. The amount required to trade is Nifty value and number of quantities but basically only margin amount is required and that is only Rs 70,000. But let's see the actual amount required for one lot of Nifty - Current Nifty value is 8600 x 75 = 6,45,000 but only margin amount is required and that is Rs 70,000 for one lot of Nifty. This is the biggest advantage of trading in Nifty future derivative contract.
Now let’s see the taxes and brokerage calculation and how profits are generated Suppose if you buy one nifty lot. One nifty lot consists of 75 nifty quantities so the amount required to buy the one lot of nifty is the margin amount and not the full amount. Margin amount is Rs 70,000 The brokerage calculation on Buying and selling amount Currently brokerage for trading in Nifty future is Rs 20 flat for buying and selling so the total brokerage the trader has to pay is Rs 40 Note - For such low brokerage rates you can open demat account with this broker . Some brokers charge in percentage like 0.03% OR 0.04 % OR 0.05%. Suggestion is to go for low brokerage rates and precisely flat brokerage rates. The following rates may vary based on different states in India so we suggest to talk to your broker to know the final taxation rates and details.
The Taxes calculation on Buying Amount In addition to brokerage, the trader has to pay the taxes to Government Taxes to pay 1. The Service tax is 15% only on brokerage. 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% 15% - ST is applicable only on brokerage. It applies on both buying & selling brokerage rates. 1. Service Tax (ST) = 2. Regulatory charges + stamp duty charges = total comes to = 0.004%. Applicable to both buying and selling amount. 1. Service Tax is calculated only on brokerage - It is 15% In our example the brokerage rate is Rs.20 for buying = 20 x 15/100 = Rs.3 2. Regulatory charges and stamp duty charges - comes to total 0.004%. If you buy one lot of Nifty then the buying amount is = Nifty value x quantities = 8600 x 75 (Nifty value is of Oct 2016) = 645000 Regulatory charges and stamp duty charges = 645000 x 0.004/100 = Rs.25.8 So the total Taxes you have to pay on buying amount is Rs 3 + 25.8 = 28.8
Now the total amount you have to pay to broker including the brokerage & taxes for buying one nifty lot is Brokerage = Rs.20 Total Taxes = Rs.28.8 Total amount comes to Rs.48.8 Lets see Profit’s generated on One Nifty lotAccording to our strategy we ask our traders to book 10 to 15 points profit. 1) If you take 10 points profit then your profit will be Rs 750 per lot ( Rs 10 x 75 quantity) and 2) If you take 15 points profit then your profit will be Rs 1125 per lot. The Taxes calculation on Selling Amount Flat brokerage rate is Rs 20 for selling. The Taxes calculation on Selling Amount In addition to brokerage, the trader has to pay the taxes to Government - 1. Service Tax (ST) = 15% - ST is applicable only on brokerage. It applies on both buying & selling brokerage. 2. STT (Security Transaction Tax) = 0.017% - STT is applicable only on selling amount. 3. Regulatory charges + stamp duty charges = total comes to = 0.004% = Applicable to both buying and selling amount. Service Tax calculation (ST)ST is 15% ST is calculated on brokerage amount and the brokerage on selling amount is Rs.20 = 20 x 15/100 = Rs.3 Security Transaction Tax (STT)The STT is 0.017% and it is only applied on selling amount The selling amount is 8615 x 75 ( we have taken 15 points profits. We our example we have bought one Nifty lot at Rs 8600 and sold at 8615) = 8615 x 75 = 646125 = 646125 x 0.017/100 = Rs.10.98
Regulatory and stamp duty charges are 0.004% The selling amount is 646125 So 646125 x 0.004/100 = Rs. 25.84 So the total Taxes you have to pay on Selling amount is = Brokerage amount + STT + stamp duty = 20+10.98+25.81 = Rs. 56.82 Total brokerage and taxes to pay for buying and selling one Nifty Future contract comes to Buying amount including taxes and brokerage comes to = Rs. 48.8 Selling amount including taxes and brokerage comes to = Rs.56.82 So total amount comes to Rs.61.62
Now lets see how much profit we have left after deducting all charges 1) If take profit of 10 points for one nifty lot then it comes to Rs 750 per lot (Rs 10 x 75 quantity) and after deducting the total charges of Rs. 61.62, your net profit comes to Rs 688 for one lot. 2) If take profit of 15 points for one nifty lot then it comes to Rs 1125 per lot (Rs 15 x 75 quantity) and after deducting the total charges of Rs. 61.62, your net profit comes to Rs 1063 for one lot. Please note - 1. The above calculation is based on only one nifty lot, if you buy more nifty lots then the profits will multiplied accordingly. 2. The nifty contract price is taken as 8600 and this as on Oct 2016 3. The taxes used were the latest at the time of writing this article. For latest taxes please contact your broker. 4. For any questions and clarification you can write to us please write to us