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Capital gains

Tax is levied on one’s gains realized using the sale of security holdings or from interest/ dividend income on such securities, with some quirky rules.

Term

Long-term capital gains (Eg: selling stock after holding it for a year) are usually taxed at a lower rate.

Subscribing to a dividend reinvestment plan complicates calculation of capital gains.

Wash sale

One can offset gains obtained by selling some securities by selling securities on which one has made a loss - but it is forbidden to buy the same security again immediately after doing so (wash sale).

Mutual funds

Suppose one invests in a mutual fund, which during the financial year makes a profit, then one has to pay tax - even if one lost money by joining the mutual fund in the middle of the year when its value was higher than at the end of the financial year.