f you're earning in white, consider your buying price to always be at least 40% above the Current Market Price (CMP) of the stock. Let’s break down the financials

Ever wonder how your income taxes, expenses, and investments play together? Here’s a deep dive into how they work, using **four real-life examples** to calculate everything from your taxes to what stock growth you’d need to recover the tax you paid. # Example 1: ₹150 Income, 25% Tax, 18% Capital Gains Tax **Step 1: Initial Income and Tax Calculation** * **Income**: ₹150 * **Income tax**: 25% * **Income Tax**: `Income Tax = 150 × 0.25 = ₹37.5` So, your post-tax income will be: `Post-Tax Income = 150 - 37.5 = ₹112.5` **Step 2: Adjust Expenses (Including GST)** * **Rent**: ₹10 (GST = 18%) * **Medicines**: ₹5 (GST = 18%) * **Cement**: ₹5 (GST = 18%) * **Fruits**: ₹5 (GST = 5%) * **Protein**: ₹5 (GST = 18%) Adjusting each expense by their respective GST: * `Rent: 10 × (1 + 0.18) = ₹11.8` * `Medicines: 5 × (1 + 0.18) = ₹5.9` * `Cement: 5 × (1 + 0.18) = ₹5.9` * `Fruits: 5 × (1 + 0.05) = ₹5.25` * `Protein: 5 × (1 + 0.18) = ₹5.9` **Total Adjusted Expenses** = `11.8 + 5.9 + 5.9 + 5.25 + 5.9 = ₹34.75` **Step 3: Leftover for Investment** Your leftover income for investment will be: `112.5 - 34.75 = ₹77.75` **Step 4: Recovering Taxes Through Stock Growth** To recover ₹37.5 of tax paid, you’ll need a pre-tax capital gain of: `Pre-tax Capital Gain = 37.5 / (1 - 0.18) = 37.5 / 0.82 = ₹44.12` **Step 5: Final Value Needed** So, the final value required to recover the tax is: `77.75 + 44.12 = ₹121.87` **Step 6: Required Stock Price Increase** The required increase in stock value is: `(121.87 - 77.75) / 77.75 × 100 = 56.7%` **Step 7: Required CAGR** To achieve this increase over 2 years, the CAGR (Compound Annual Growth Rate) would be: `(121.87 / 77.75)^(1/2) - 1 = (1.565)^(0.5) - 1 = 1.25 - 1 = 0.25 or 25%` # Example 2: ₹200 Income, 30% Tax, 18% Capital Gains Tax **Step 1: Initial Income and Tax Calculation** * **Income**: ₹200 * **Income tax**: 30% * **Income Tax**: `Income Tax = 200 × 0.30 = ₹60` So, your post-tax income will be: `Post-Tax Income = 200 - 60 = ₹140` **Step 2: Adjust Expenses (Including GST)** * **Rent**: ₹25 (GST = 18%) * **Medicines**: ₹10 (GST = 18%) * **Cement**: ₹15 (GST = 18%) * **Fruits**: ₹7 (GST = 5%) * **Protein**: ₹8 (GST = 18%) Adjusting each expense by their respective GST: * `Rent: 25 × (1 + 0.18) = ₹29.5` * `Medicines: 10 × (1 + 0.18) = ₹11.8` * `Cement: 15 × (1 + 0.18) = ₹17.7` * `Fruits: 7 × (1 + 0.05) = ₹7.35` * `Protein: 8 × (1 + 0.18) = ₹9.44` **Total Adjusted Expenses** = `29.5 + 11.8 + 17.7 + 7.35 + 9.44 = ₹75.79` **Step 3: Leftover for Investment** Your leftover income for investment will be: `140 - 75.79 = ₹64.21` **Step 4: Recovering Taxes Through Stock Growth** To recover ₹60 of tax paid, you need a pre-tax capital gain of: `Pre-tax Capital Gain = 60 / (1 - 0.18) = 60 / 0.82 = ₹73.17` **Step 5: Final Value Needed** So, the final value required to recover the tax is: `64.21 + 73.17 = ₹137.38` **Step 6: Required Stock Price Increase** The required increase in stock value is: `(137.38 - 64.21) / 64.21 × 100 = 113.9%` **Step 7: Required CAGR** To achieve this increase over 2 years, the CAGR would be: `(137.38 / 64.21)^(1/2) - 1 = (2.14)^(0.5) - 1 = 1.463 - 1 = 0.463 or 46.3%` # Example 3: ₹120 Income, 15% Tax, 12% Capital Gains Tax **Step 1: Initial Income and Tax Calculation** * **Income**: ₹120 * **Income tax**: 15% * **Income Tax**: `Income Tax = 120 × 0.15 = ₹18` So, your post-tax income will be: `Post-Tax Income = 120 - 18 = ₹102` **Step 2: Adjust Expenses (Including GST)** * **Rent**: ₹10 (GST = 12%) * **Medicines**: ₹5 (GST = 12%) * **Cement**: ₹5 (GST = 12%) * **Fruits**: ₹5 (GST = 5%) * **Protein**: ₹5 (GST = 12%) Adjusting each expense by their respective GST: * `Rent: 10 × (1 + 0.12) = ₹11.2` * `Medicines: 5 × (1 + 0.12) = ₹5.6` * `Cement: 5 × (1 + 0.12) = ₹5.6` * `Fruits: 5 × (1 + 0.05) = ₹5.25` * `Protein: 5 × (1 + 0.12) = ₹5.6` **Total Adjusted Expenses** = `11.2 + 5.6 + 5.6 + 5.25 + 5.6 = ₹33.25` **Step 3: Leftover for Investment** Your leftover income for investment will be: `102 - 33.25 = ₹68.75` **Step 4: Recovering Taxes Through Stock Growth** To recover ₹18 of tax paid, you need a pre-tax capital gain of: `Pre-tax Capital Gain = 18 / (1 - 0.12) = 18 / 0.88 = ₹20.45` **Step 5: Final Value Needed** So, the final value required to recover the tax is: `68.75 + 20.45 = ₹89.2` **Step 6: Required Stock Price Increase** The required increase in stock value is: `(89.2 - 68.75) / 68.75 × 100 = 29.7%` **Step 7: Required CAGR** To achieve this increase over 2 years, the CAGR would be: `(89.2 / 68.75)^(1/2) - 1 = (1.298)^(0.5) - 1 = 1.139 - 1 = 0.139 or 13.9%` # Example 4: ₹350 Income, 35% Tax, 20% Capital Gains Tax **Step 1: Initial Income and Tax Calculation** * **Income**: ₹350 * **Income tax**: 35% * **Income Tax**: `Income Tax = 350 × 0.35 = ₹122.5` So, your post-tax income will be: `Post-Tax Income = 350 - 122.5 = ₹227.5` **Step 2: Adjust Expenses (Including GST)** * **Rent**: ₹50 (GST = 18%) * **Medicines**: ₹20 (GST = 18%) * **Cement**: ₹30 (GST = 18%) * **Fruits**: ₹10 (GST = 5%) * **Protein**: ₹15 (GST = 18%) Adjusting each expense by their respective GST: * `Rent: 50 × (1 + 0.18) = ₹59` * `Medicines: 20 × (1 + 0.18) = ₹23.6` * `Cement: 30 × (1 + 0.18) = ₹35.4` * `Fruits: 10 × (1 + 0.05) = ₹10.5` * `Protein: 15 × (1 + 0.18) = ₹17.7` **Total Adjusted Expenses** = `59 + 23.6 + 35.4 + 10.5 + 17.7 = ₹146.2` **Step 3: Leftover for Investment** Your leftover income for investment will be: `227.5 - 146.2 = ₹81.3` **Step 4: Recovering Taxes Through Stock Growth** To recover ₹122.5 of tax paid, you need a pre-tax capital gain of: `Pre-tax Capital Gain = 122.5 / (1 - 0.20) = 122.5 / 0.80 = ₹153.13` **Step 5: Final Value Needed** So, the final value required to recover the tax is: `81.3 + 153.13 = ₹234.43` **Step 6: Required Stock Price Increase** The required increase in stock value is: `(234.43 - 81.3) / 81.3 × 100 = 188.5%` **Step 7: Required CAGR** To achieve this increase over 2 years, the CAGR would be: `(234.43 / 81.3)^(1/2) - 1 = (2.88)^(0.5) - 1 = 1.69 - 1 = 0.69 or 69%` # TL;DR: Want to understand how taxes, expenses, and investments stack up? It all boils down to: * **Post-tax income** \- **Expenses** = **Leftover for investment** * Pre-tax capital gain is calculated to cover the income tax paid * The higher your taxes, the higher the stock growth you’ll need to recover that cost. The more risk you need to take, and the more chances of losing your money—because you already lost it through income tax! 😅