Calculate Stock Investment Profit or Loss ?
Learn how to calculate profit or loss from stock investments in India, including the impact of brokerage fees, taxes, and dividends for a complete financial picture.
Investing in the Indian stock market can be a great way to build wealth, but understanding your financial outcomes is crucial. Calculating profit or loss from a stock investment allows you to assess your financial performance and refine your investment strategies.
Step-by-Step Guide to Calculate Profit or Loss
1. Determine the Purchase Price
- Find the price you bought the stock (“buy price”). Include brokerage fees, Securities Transaction Tax (STT), and other charges.
- Example: If you purchased 100 shares of ABC Ltd. at ₹100 per share with a brokerage fee of ₹50 and STT of ₹10, your total purchase cost would be:
Total Purchase Price = (Shares × Price per Share) + Brokerage + STT = (100 × ₹100) + ₹50 + ₹10 = ₹10,060
2. Determine the Selling Price
- Find the price you sold the stock (“sell price”) and deduct any selling fees, including brokerage and STT.
- Example: If you sold 100 shares of ABC Ltd. at ₹120 per share with a brokerage fee of ₹60 and STT of ₹12, your total selling amount would be:
Total Selling Price = (Shares × Price per Share) – Brokerage – STT = (100 × ₹120) – ₹60 – ₹12 = ₹11,928
3. Calculate Profit or Loss
o Subtract the total purchase price from the total selling price.
o Profit or Loss = Total Selling Price – Total Purchase Price
o Example: Profit = ₹11,928 – ₹10,060 = ₹1,868
If the result is positive, you have a profit. If the result is negative, it’s a loss.
Total Selling Price = (Shares × Price per Share) – Brokerage – STT = (100 × ₹120) – ₹60 – ₹12 = ₹11,928
4. Factor in Dividends (if applicable)
- Add any dividends received during the holding period to your total profit.
- Example: If ABC Ltd. paid a dividend of ₹5 per share, you earned ₹500 from dividends (100 shares × ₹5). Your total profit would then be:
Total Profit = Profit + Dividends = ₹1,868 + ₹500 = ₹2,368
5. Adjust for Capital Gains Tax
- Short-Term Capital Gains (STCG): Stocks held for less than 1 year attract a tax of 15% on the gains.
- Long-Term Capital Gains (LTCG): Gains exceeding ₹1 lakh from stocks held for more than 1 year are taxed at 10% without indexation.
- Example: If your profit is ₹2,368 and it falls under STCG, your tax liability would be:
Tax = Profit × 15% = ₹2,368 × 0.15 = ₹355.2
1. After-tax profit would then be:
2. After-Tax Profit = Profit – Tax = ₹2,368 – ₹355.2 = ₹2,012.8
Tools to Simplify the Calculation
Common Mistakes to Avoid
- Neglecting Fees and Taxes: Always account for all fees and taxes to get an accurate profit or loss figure.
- Ignoring Dividends: Dividends significantly enhance your returns, so include them in your calculations.
- Misinterpreting Tax Rules: Ensure you correctly classify your gains as short-term or long-term to avoid errors.
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Conclusion
Calculating profit or loss from a stock investment in India involves understanding your purchase and selling prices, factoring in dividends, and adjusting for taxes and fees. By mastering this process, you can accurately evaluate your investments and make informed decisions to optimize your financial performance.
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