Profit Margin and Markup Calculator
Margin arithmetic is simple enough that every calculator gets the sum right. The money gets lost somewhere else: in the gap between markup and margin, in the fee that comes off before the money reaches you, and above all in what a discount really costs once you work out how many more units it takes to stand still.
What one unit costs you
What you pay your supplier, or what the materials come to.
Packaging, shipping, returns. Optional, leave at zero if it is already in the cost above.
What you charge
The figure on the tag, tax included.
Optional. Set it to zero to leave discounting out.
GST
How you get paid
Usually zero in India.
Your gross margin
40.0%
- Markup on cost
- 66.7%
- Margin after the fee
- 37.6%
- Revenue you keep
- ₹1,000
- Profit per unit
- ₹376
A 66.7% markup on cost is the same thing as a 40.0% margin on price. Same rupees either way, two different numbers, because one is measured against what you paid and the other against what you charged. Markup answers what should I charge. Margin answers how much of that did I keep. Quote one when the person across the table means the other and you give away the difference.
What 20% off actually costs
| Full price | After 20% off | |
|---|---|---|
| What the customer pays | ₹1,180 | ₹944 |
| Profit per unit | ₹376 | ₹181 |
| Margin | 37.6% | 22.6% |
Taking 20% off cuts your price by ₹236 and your profit by ₹195. To earn what you were earning before, you now need to sell 2.08 times as many units, an increase of 108%. A discount is not a 20% cut to your profit. It is a cut to the slice of the price you were keeping, and that slice is much smaller than the price.
The payment fee takes ₹24 a sale, 2.4% of your revenue, not the 2% on the tin. That is because the gateway charges on the whole ₹1,180 it moves, GST included, while only ₹1,000 of that is your revenue Not one of the 23 calculators we read has a field for any of this.
Of the ₹1,180 the customer pays, ₹180 is GST that was never yours. Your revenue is ₹1,000. Work your margin against the tag price instead and you would call this a 49.2% margin, which is the mistake the inclusive-pricing habit makes easy.
This is a gross figure, close to what accountants call contribution margin: it covers the cost of the unit and the cost of collecting the money, and nothing else. Rent, salaries, software and tax all come out of what is left. Most tools in this field compute the same thing and call it profit margin, and one of them labels it net profit margin, which it is not. To find the volume that covers your fixed costs too, the break-even calculator picks up where this stops. Figures are for working things out, not accounting or tax advice.
Cite this calculator
Using this in an article, a report or a class? Please credit it, and link back so readers can run the numbers themselves.
The Money Decoded. "Profit Margin and Markup Calculator (India and US)." https://themoneydecoded.com/calculators/profit-margin
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Markup and margin are not the same number
Markup is your profit measured against what the item cost you. Margin is the same profit measured against what you sold it for. Same money, two yardsticks, and because the selling price is always the larger of the two, the margin is always the smaller percentage.
| Markup on cost | Margin on price |
|---|---|
| 10% | 9.09% |
| 25% | 20.00% |
| 33.33% | 25.00% |
| 50% | 33.33% |
| 100% | 50.00% |
To convert, divide the markup by one plus the markup. Going back the other way, markup equals margin divided by one minus margin. Xero puts the practical version of this better than anyone: to reach a 20% margin you need a 25% markup, not a 20% one.
The cost of confusing them is not academic. Two Indian pages in our review were the only ones anywhere to frame it as a negotiation risk rather than a definition quiz, and they are right to. If a buyer asks for a 30% margin and you quote a 30% markup, you have agreed to a price roughly 7 percentage points below what you thought, on every unit, for the life of the contract.
What a discount actually costs you
A discount does not cut your profit by the size of the discount. It cuts the slice of the price you were keeping, and that slice is much smaller than the price.
Take a product priced at 1,000 that costs 600 to make, a 40% margin. Knock 20% off and the price falls to 800, but the profit falls from 400 to 200. The price dropped by a fifth. The profit halved. To earn what you were earning, you now have to sell twice as many.
| Discount | Margin after | Extra volume needed to break even |
|---|---|---|
| 5% | 36.8% | +14% |
| 10% | 33.3% | +33% |
| 20% | 25.0% | +100% |
| 30% | 14.3% | +300% |
| 40% | 0% | no volume recovers it |
The shortcut, if you want to check any case in your head: the volume multiple is your margin divided by your margin minus the discount. At a 40% margin a 20% discount gives 0.40 divided by 0.20, which is 2. Two times the sales.
Thin margins are punished hardest. At a 15% margin, taking 10% off means selling three times as much to stand still. At a 60% margin the same 10% off needs only a fifth more. So the businesses least able to absorb a discount are the ones for which a discount does the most damage.
This is the one thing no other tool in this field computes. Of 23 margin and markup calculators we read on 25 August 2026, exactly one models a discount at all, and it stops at the percentage. Its own worked example takes jeans costing $60 from $100 to $80 and reports the margin falling from 40% to 25%. It never mentions that profit per unit went from $40 to $20, and its entire advice on recovering that is to plan discounts carefully so that you increase revenue. The words break-even and volume do not appear on the page.
The cost that never arrives as a bill
The fee your payment processor charges is a direct cost of the sale, and it is the one cost sellers most reliably forget. Razorpay's own pricing page explains why. The fee and the tax on it are deducted from the customer's payment at source, and the remainder is settled to you. No invoice ever lands. The money just shows up smaller than the price you charged.
Rates read from each provider's own pricing page in August 2026:
| Where | How you take payment | Rate |
|---|---|---|
| India | Cards, UPI, net banking, wallets | 2% plus 18% GST |
| India | International, Amex, Diners, EMI | 3% plus 18% GST |
| US | Online or invoice | 2.9% plus 30 cents |
| US | In person, card present | 2.6% plus 15 cents |
| US | Keyed in or card on file | 3.5% plus 15 cents |
The fixed component is the part that catches small sellers. At 2.9% plus 30 cents, a $5 sale pays 8.9% and a $100 sale pays 3.2%. The headline percentage is only close to true on large baskets.
In India the arithmetic bends differently. GST at 18% is charged on the fee itself, so a quoted 2% costs 2.36%. On a regular registration that GST is input credit and comes back to you. On the composition scheme it does not, because section 10(4) of the CGST Act bars input credit outright, so a composition dealer pays the full 2.36% and keeps none of it. There is a second effect too: the gateway charges on the whole amount it moves, GST included, so even with input credit a 2% fee costs 2.36% of your actual revenue.
Not one of the 23 calculators we read has a field for any of this. One tells readers in prose to remember transaction fees. One mentions platform fees inside a table of industry benchmarks. One offers fields for shipping and customer acquisition cost but not for the fee on the payment itself.
In India the tag price is not your revenue
GST collected from a customer is not income. It is tax you are holding on the government's behalf, and it never belonged to the business. At 18%, a price tag of 1,180 is 1,000 of revenue and 180 that was never yours.
Indian retail prices are usually quoted inclusive of GST, which is exactly why this goes wrong here and rarely goes wrong in the US, where tax is added at the till and nobody mistakes it for takings. Work a margin against the 1,180 on a product costing 600 and you will call it a 49.2% margin. The real figure is 40%. Strip the tax first, using price times 100 divided by 100 plus the rate, and the number comes right.
Of the 23 pages we read, three handle tax properly and only one of those defaults to inclusive pricing. One widely used calculator offers a checkbox labelled for tax, VAT or GST and states nowhere on the page whether the price you enter is meant to include it or not, which makes the answer unreadable either way.
Which margin is this
This is a gross figure, and closer still to what accountants call contribution margin: it covers the cost of the unit and the cost of collecting the money, and nothing else. Rent, salaries, software, interest and tax all come out of what is left.
Gross, operating and net margin are three different measurements separated by which costs have been taken off. Nearly every tool in this field computes the first and calls it profit margin. One labels identical arithmetic net profit margin on one page and correctly calls it gross on its sibling page. One states that gross margin is also known as operating margin and EBIT margin, which is wrong: operating expenses are precisely what separates them. One well-known calculator says plainly that it uses all the terms interchangeably and asks forgiveness if that does not match some definitions, which is at least honest.
Contribution margin, the term that fits what these tools actually compute, appears zero times across all 23 pages.
What this calculator does not do
It does not tell you whether your business works. Margin is a per-unit measure and says nothing about whether your volume covers your rent. That is a break-even question, and the break-even calculator picks up exactly where this one stops.
It handles one product at one price. A shop selling many things at different margins needs a weighted average, which no tool in this field computes.
It does not model returns, chargebacks, marketplace commissions or the cost of acquiring the customer. Any of those can be larger than the payment fee, and on a discounted sale they are spread over a thinner margin.
And it does not compute your tax. It strips GST out of an inclusive price so that your revenue figure is right, and it flags where input credit changes the cost of a fee, but what you owe depends on facts this page does not have. A chartered accountant in India or a CPA in the US is the right person for that.
Pair this with the guide
The companion piece, profit margin versus markup, works through the confusion and the discount arithmetic in more detail. If you are pricing your own time rather than a product, the freelance rate calculator approaches the same question from the other end. And for a worked example of how thin margins behave in a real business model, what dropshipping actually costs is the case study.
Frequently asked questions
What is the difference between margin and markup?
Markup is your profit measured against what the item cost you. Margin is the same profit measured against what you sold it for. Because the selling price is the bigger of the two numbers, the margin percentage is always the smaller one. A 50% markup is a 33.3% margin. A 100% markup is a 50% margin. The rupees or dollars are identical either way, only the yardstick changes.
How do I convert markup to margin?
Divide the markup by one plus the markup: margin = markup / (1 + markup). Going the other way, markup = margin / (1 - margin). So a 25% markup is a 20% margin, a 33.33% markup is a 25% margin, and a 60% margin needs a 150% markup. The calculator on this page shows both figures at once so you never have to do the conversion by hand.
How much extra do I need to sell to cover a discount?
More than most people expect. If m is your margin and d is the discount, both as decimals, the volume you need to earn the same profit is m divided by (m minus d). At a 40% margin, 20% off means selling twice as many units, not 20% more. At a 30% margin, 10% off needs 50% more volume. At a 15% margin, the same 10% off needs three times the volume. And a discount equal to your margin can never be recovered, because there is no profit per unit left to multiply.
Why does a small discount cut profit so much?
Because the discount comes off the price, but it comes out of the margin, and the margin is only a slice of the price. On a product sold at 1,000 that cost 600, the margin is 400. A 10% discount takes 100 off the price, which is a tenth of the price but a quarter of the profit. The thinner your margin, the larger that ratio, which is why low-margin businesses are hurt most by the discounts they are most often pushed into.
Do payment processing fees count against my margin?
Yes, and they are easy to miss because they never arrive as a bill. Razorpay's own pricing page explains the mechanism: the fee and the GST on it are deducted from the customer's payment at source, so the money simply reaches you smaller. Rates verified in August 2026 run 2% plus 18% GST in India, and 2.9% plus 30 cents online in the US. Of 23 margin calculators we read, not one had a field for this.
Should I calculate margin on the GST-inclusive price?
No. GST collected from a customer is not revenue, it is tax you are holding for the government. At 18%, a price tag of 1,180 is 1,000 of revenue and 180 that was never yours. A seller who works the margin against 1,180 will overstate it every time. Indian retail prices are usually quoted inclusive, which is why this trap is common here and rare in the US, where tax is added at the till.
What is a good profit margin?
It depends so heavily on what you sell that a single number is not useful. Grocery retail runs on single digits while software runs on 70% or more, and both can be healthy or failing. The figure worth watching is whether your margin covers your fixed costs at the volume you actually sell, which is a break-even question rather than a margin one. A margin percentage on its own tells you nothing about whether the business works.
Is this gross margin or net margin?
Gross, and closer still to what accountants call contribution margin. It covers the cost of the unit and the cost of collecting the money, and nothing else. Rent, salaries, software, interest and tax all come out of what is left. Most calculators in this field compute the same thing and call it profit margin, one labels it net profit margin, and one asserts that gross margin and EBIT margin are the same thing. They are not.
Sources
Every rate on this page was read from the provider's own pricing page on 25 August 2026. The full record, including the pages we could not reach, is kept in the repository as a working document.
- Razorpay pricing page for the 2% plus GST transaction rate and for the mechanism by which the fee and its GST are deducted from the customer's payment at source
- PayU pricing page for 2% on domestic cards, net banking, wallets and BNPL, 3% on EMI, Amex, Diners and international transactions, and for the statement that 18% GST applies on all transactions
- Square pricing page for the US rates of 2.9% plus 30 cents online, 2.6% plus 15 cents in person and 3.5% plus 15 cents for keyed-in or card-on-file payments
- Central Board of Indirect Taxes and Customs, section 10(4) of the CGST Act 2017, for the bar on input credit under the composition scheme
- Observations about how other margin and markup calculators handle discounting, payment fees, tax-inclusive pricing and the gross-versus-net distinction come from a live review of 23 ranking pages on 25 August 2026, reading served markup and calculator scripts rather than marketing copy