Topics
Linear Equations in Two Variables
- Foundation of Linear Equations in Two Variables
- Simultaneous Linear Equations
- Graph of a Linear Equation in Two Variables
- Methods of Solving Linear Equations in Two Variables > Graphical Method
- Methods of Solving Linear Equations in Two Variables > Determinant method (Cramer’s Rule)
- Equations Reducible to Linear Equations
- Application of Simultaneous Equations
Quadratic Equations
- Concept of Quadratic Equations
- Factorisation Method
- Completing the Square Method
- Quadratic Formula (Shreedharacharya's Rule)
- Nature of Roots of a Quadratic Equation
- Relation Between Zeroes (Roots) and Coefficients of a Quadratic Equation
- Formation of a Quadratic Equation with Given Roots
- Application of Quadratic Equation
Arithmetic Progression
Financial Planning
Probability
Statistics
Definition: Brokerage
Brokerage is the amount charged by a registered share broker for buying or selling shares on behalf of an investor.
Brokerage is always calculated on the Market Value (MV) of shares.
GST on Brokerage
GST (Goods and Services Tax) is charged on the brokerage amount.
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In most school-level examples, GST on brokerage is taken as 18%.
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GST is calculated on the brokerage, not directly on the market value of shares.
Formulas for Brokerage and Share Transactions
Brokerage
\[ \text{Brokerage} = \frac{\text{Rate of brokerage}}{100} \times \text{Market Value} \]
Buying Price
When shares are purchased, brokerage is added to the market value.
\[ \text{Buying Price} = \text{Market Value} + \text{Brokerage} \]
If GST on brokerage is included:
\[ \text{Total Purchase Cost} = \text{Market Value} + \text{Brokerage} + \text{GST on Brokerage} \]
Selling Price
When shares are sold, brokerage is deducted from the market value.
\[ \text{Selling Price} = \text{Market Value} - \text{Brokerage} \]
If GST on brokerage is included:
\[ \text{Net Sale Proceeds} = \text{Market Value} - \text{Brokerage} - \text{GST on Brokerage} \]
Total Brokerage
\[ \text{Total Brokerage} = \text{Brokerage per share} \times \text{Number of shares} \]
GST on Brokerage
\[ \text{GST} = \frac{18}{100} \times \text{Brokerage} \]
Profit or Loss
\[ \text{Profit or Loss} = \text{Net Sale Proceeds} - \text{Total Purchase Cost} \]
If the result is positive, there is a profit.
If the result is negative, there is a loss.
Example
Question: Nalinitai invested ₹6024 in the shares of FV ₹10 when the Market Value was ₹60. She sold all the shares at MV of ₹50 after taking 60% dividend. She paid 0.4% brokerage at each stage of transactions. What was the total gain or loss in this transaction ?
Solution:
1. Shares Purchased: \[ \text{FV} = \text{₹ } 10, \; \text{MV} = \text{₹ } 60 \]
\[ \text{Brokerage per share} = \frac{0.4}{100} \times 60 = \text{₹ } 0.24 \]
\[ \text{Cost of one share} = 60 + 0.24 = \text{₹ } 60.24 \]
\[ \text{Number of shares} = \frac{6024}{60.24} = 100 \]
2. Shares Sold: \[ \text{FV} = \text{₹ } 10, \; \text{MV} = \text{₹ } 50 \]
\[ \text{Brokerage per share} = \frac{0.4}{100} \times 50 = \text{₹ } 0.20 \]
\[ \text{Selling price per share} = 50 - 0.20 = \text{₹ } 49.80 \]
\[ \text{Selling price of 100 shares} = 100 \times 49.80 = \text{₹ } 4980 \]
3. Dividend Received ( \[ 60\% \] ):
\[ \text{Dividend per share} = \frac{60}{100} \times 10 = \text{₹ } 6 \]
\[ \text{Dividend on 100 shares} = 6 \times 100 = \text{₹ } 600 \]
4. Total Income & Loss Calculation:
\[ \text{Nalinitai's income} = 4980 + 600 = 5580 \]
\[ \text{Sum invested} = \text{₹ } 6024 \]
\[ \text{Loss} = 6024 - 5580 = 444 \]
Ans: Nalinitai's loss is \[ \text{₹ } 444. \]
Key Points: Brokerage and Taxes on Share Trading
- Market Value (MV): Current buying or selling price of a share.
- Brokerage: Broker's commission, calculated on market value.
- Buying cost: \[ MV + \text{Brokerage} + \text{GST on brokerage}. \]
- Net selling amount: \[ MV - \text{Brokerage} - \text{GST on brokerage}. \]
- GST on brokerage: Usually \[ 18\%. \]
- Profit/Loss: Net sale proceeds plus dividend minus total purchase cost.
- Dividend: Usually calculated on face value.
