Five things to know about capital gains tax

1. If you actively invest and trade in stocks, you should be aware that each such transaction is likely to trigger a tax liability.

2. If you have bought or sold shares without holding them for a period of one year, any gain made on these transactions is subject to short-term capital gains tax at the rate of 15%.

3. This tax has to be paid in advance in instalments, or at the time of filing your income tax return, depending on the volume of transactions.

4. The tax liability will be computed on the first-in, first-out basis, on all transactions and after squaring off any short-term capital losses you have suffered.

5. If the taxman thinks you are trading too much, or borrowing to trade in shares, he may choose to treat your income from share trading as business income and tax it differently.

The content is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre and Arti Bhargava