The two tables are not directly related as none is parent to the other. The faculty table is parent to both tables and this is what relates the two tables indirectly.
When joining the faculties' students with the faculties' subjects per faculty, you get all combinations (john|physics, mark|physics, sam|physics, john|chemistry, mark||chemistry, ...). Whether John really has the subject Physics cannot even be gathered from the database. We see that John studies a faculty containing the subjects Physics and Chemistry, but does every student have every subject belonging to their faculty? You probably know but we don't. That shows that in order to write proper queries, one should know their database :-)
Now you are joining the tables and get all students per faculty multiplied with all subjects per faculty. You limit this to level_id = 1, which gets you 2 students x 2 subjects = 4. You could use COUNT(*) for this, because you are counting rows. By applying COUNT(subjects.id) instead you are only counting rows for which the subject ID is not null, but that is true for all rows, because all four combined rows have either subject ID 1 (Physics) or 2 (Chemistry). Counting something that cannot be null makes no sense, except for counting distinct, as has already been suggested. You can COUNT(DISTINCT subjects.id) to get the distinct number of subjects matching yur conditions.
This, however, has two drawbacks. First, the query doesn't clearly show your intention. Why do you join all students with all subjects, when your are not really interested in the (four) combinations? Secondly, you are building an unnecessary intermediate result (four rows in your small example) that must be searched for duplicates, so these can be removed from the counting. That means more memory consumed and more work for the DBMS.
What you want to count is subjects. So select from the subjects table. Your condition is that a student exists with level 1 for the same faculty. Conditions belong in the WHERE clause. Use EXISTS as Gordon suggests in his answer or use IN which is slightly shorter to write and may hence be considered a tad more readable (but that boils down to personal preference, as EXISTS and IN express exactly the same thing here).
select count(*)
from subjects
where faculty_id in (select faculty_id from users where level_id = 1);