1. The difference between gross and net P&L
Gross P&L is simply (sell price − buy price) × quantity. It ignores everything else. Net P&L is what actually lands in your bank account after all charges and taxes. The gap between the two is often far larger than investors expect.
- Gross P&L: Purely the price move.
- Charges: Brokerage, STT, exchange fees, GST, stamp duty, SEBI charges, DP charges.
- Tax: STCG at 15% or LTCG at 10% above ₹1 lakh (equity, India).
- Net P&L: Gross P&L − charges − tax. This is your real result.
2. Every charge on an Indian equity delivery trade
Here's a realistic breakdown for a ₹1,00,000 buy and a ₹1,25,000 sell through a discount broker:
| Charge | Buy side | Sell side |
|---|---|---|
| Brokerage (flat ₹20/order) | ₹20 | ₹20 |
| STT (0.1%) | ₹100 | ₹125 |
| Exchange txn charges (0.00325%) | ₹3.25 | ₹4.06 |
| SEBI charges (0.0001%) | ₹0.10 | ₹0.13 |
| Stamp duty (0.015%, buy only) | ₹15 | — |
| GST (18% on brokerage + exch + SEBI) | ₹4.20 | ₹4.35 |
| DP charges (sell only) | — | ₹13.50 |
| Total | ₹142.55 | ₹167.04 |
Total charges: ₹309.59. That's 0.31% of the buy value — and it comes straight off your profit.
💡 On a ₹25,000 gross profit, charges of ₹310 cut it by 1.2%. On a ₹2,500 gross profit, the same charges cut it by 12%.
3. STCG vs LTCG: the 12-month cliff
For listed equity shares and equity mutual funds in India, the holding period determines your tax rate:
| Holding period | Gain type | Tax rate | Exemption |
|---|---|---|---|
| ≤ 12 months | STCG | 15% | None |
| > 12 months | LTCG | 10% | First ₹1,00,000 per year |
The difference is dramatic. On a ₹5,00,000 gain:
- Sold at 11 months (STCG): Tax = ₹75,000
- Sold at 13 months (LTCG): Tax = ₹40,000 (10% on ₹4,00,000 after ₹1L exemption)
- Difference: ₹35,000 saved by waiting 2 months
⚠️ The ₹1 lakh LTCG exemption is per financial year, across all equity holdings. If you've already booked ₹1 lakh of LTCG this year, the next rupee is taxable immediately.
4. Your true breakeven price
Because of charges, the price at which you break even is always higher than your buy price. On a ₹1,000 buy with ₹310 of total charges on 100 shares, your breakeven is roughly:
Breakeven = (Buy value + Total charges) ÷ Quantity
= (1,00,000 + 310) ÷ 100 = ₹1,003.10
So the stock must rise 0.31% before you make a single rupee. For a high-frequency trader doing this 100 times a year, that 0.31% compounds into a massive drag.
5. Why frequent trading is so expensive
Charges don't scale down with trade size beyond the flat brokerage component. A ₹10,000 trade and a ₹10,00,000 trade both pay ₹20 brokerage — but the smaller trade pays the same STT percentage on a much smaller base, and the flat costs dominate.
- 1 trade/month: ~₹3,700 in charges per year
- 10 trades/month: ~₹37,000 in charges per year
- 50 trades/month: ~₹1,85,000 in charges per year
That last figure is before tax. If your trading capital is ₹10 lakh, you need an 18.5% gross return just to cover costs — before making any real money.
6. A worked example: profitable trade
You buy 200 shares at ₹800 and sell at ₹1,000 after 14 months.
- Buy value: ₹1,60,000
- Sell value: ₹2,00,000
- Gross P&L: ₹40,000
- Buy charges: ~₹225
- Sell charges: ~₹265
- Net before tax: ₹39,510
- Capital gain (after charges): ₹39,510
- LTCG tax: LTCG = 10% on (39,510 − 1,00,000) = ₹0 (below exemption)
- Net P&L: ₹39,510
Because the gain is under ₹1 lakh, the entire amount is tax-free. Holding for over a year also kept the rate at 10% instead of 15%.
7. A worked example: loss-making trade
You buy 200 shares at ₹1,000 and sell at ₹900 after 3 months.
- Buy value: ₹2,00,000
- Sell value: ₹1,80,000
- Gross P&L: −₹20,000
- Buy charges: ~₹275
- Sell charges: ~₹250
- Net P&L: −₹20,525
- Capital gains tax: ₹0 (no gain)
The loss is ₹525 larger than the price move suggests. But that ₹20,525 capital loss can be set off against other capital gains in the same year, or carried forward for up to 8 years — a valuable but often forgotten benefit.
✓ Always report capital losses in your tax return, even if you have no gains to offset this year. The carry-forward is only allowed if you file on time.
8. Common mistakes to avoid
- Using gross P&L to plan your budget: The number in your head is not the number in your bank.
- Ignoring the breakeven gap: Small trades need a larger price move to be profitable.
- Selling at 11 months to "lock in" gains: You may be paying 15% instead of 10%.
- Forgetting the ₹1 lakh LTCG exemption: Plan redemptions across financial years to use it twice.
- Not tracking per-lot holding periods: If you bought in multiple tranches, each lot has its own holding period.
- Ignoring the DP charge: ₹13.50 per scrip per day sounds tiny until you sell 50 different stocks in a day.
- Over-trading: Every trade is a fresh round of costs. Let winners run.
9. Final thoughts
The price move is only part of your return. Charges and taxes are certain, while market gains are not — so treat them with respect. Knowing your net P&L and your breakeven price makes you a sharper investor and a better planner at tax time.
Use this calculator before you sell to see exactly what you'll keep. A few seconds of calculation can save you thousands — and occasionally talk you out of a bad trade altogether.
