Average Monthly Income of a Swing Trader

A swing trader in India can earn a monthly income that is dependent on the initial capital, leverage, trading strategy, and tax implications.

Below I have taken an example of 50000 investment. With a capital of 50000, practically how much a swing trader can earn in a month was shown in the below sections.

Average Income per Month For INR 50,000 Investment

Let us maintain certain hypothetical assumptions to arrive at conclusions.

You as a swing trader can make an initial investment of INR 50,000.00 and obtain a leverage of 5x to trade a stock worth of INR 2,50,000.

In case, you plan to make 5% to 10% profit per trade and conduct about 10 trades per month.

That means, you will be able to earn INR 12,500 to INR 25,000 per trade or INR 1,25,000.00 to INR 2,50,000 per month for 10 trades.

Your net income will be total earning minus different taxes laid by your broker, IT dept, and others if any.

Expenditure Incurred in form of Services/Taxes:

Now, let come to the costs you incur in different ways, brokerage fees, stamp duty, securities transaction tax (STT), GST, and transaction charges to the broker.

Above all, you will have to pay income tax on your earnings every year, hence you will have to make a rough calculation that goes close to the net income left after taxation by IT.

Brokerage Charges:

Let us assume that your broker charges a fee worth 0.1% of the trading account capital. And, if you conduct a trade worth INR 2,50,000 then you will have to forgo brokerage fees worth INR 250.00.

In this manner, if you perform 10 trades in a month then you will be levied by INR 2500.00.

Your Net Income per Month: Swing Trade Earnings

In continuation to the above example given, you can calculate your net income earned per month for low profit margin (5%) or high profit margin (10%).

Low profit margin (5 %) Per Trade

Gross income – costs = taxable income.

INR 1,25,000 – INR 2,500 = INR 1,22,500

(Costs is the brokerage costs)

Taxable income – Taxes = Net income

INR 1,22,500 – INR 42,045 = 80,455

High profit margin (10%) Per Trade

Gross income – costs = taxable income.

INR 2,50,000 – INR 2,500 = INR 2,47,500

(Costs is the brokerage costs)

Taxable income – Taxes = Net income

INR 2,47,500 – INR 84,915 = 80,455

From the above cited examples, your net income per month will be INR 80,455 with a profit margin of 5 percent per trade.

Making a capital investment of INR 50,000.00 and obtaining a leverage of 5x from the broker can help you trade a stock worth INR 2,50,000.00.

Keeping all the dimensions the same, if you make a profit margin of 10 % per trade then you will be earning an income of INR 1,62,585 per month.

Income Tax on Individuals (FY 2023-24)

The Income tax Act does consider swing traders income as business income and the tax is levied on the basis of slab rates.

If you are an individual doing swing trading and are not yet 60 years of age will have to pay tax worth for FY 2023-24 is mentioned below.

If you earn an income of INR 3 lakh (Nill Tax), from INR 3 lakh to INR 6 lakh, will be 5%, from INR 6.0 lakh to INR 9 lakh you will have to pay 10%, and from INR 9.0 lakh to INR 12 lakh you will have to pay 15%. Whatever amount you earn above INR 12 lakh, you will have to pay 30%. Likewise, if your income goes above INR 50 lakh then you will have to pay an additional surcharge of 10% and a cess of 4 % on the total tax payable.

Ultimately, if you earn above INR 50 lakh, you will be under a higher tax bracket (30 % + 10 % surcharge + 4% cess) = 34 %.