YOU can buy stocks either from the stock market directly or during a company's Initial Public Offer (IPO).

You can subscribe to a company's IPO at the issue price, that is, the price at which the shares are offered.

Once the IPO period is over, the shares get listed on the exchange and you can either sell them (to make listing gains) or continue to hold them.

Depending on when you sell the shares you got during an IPO, you will need to pay tax on the gains. 

wealth explains how.

Capital gains tax

-- If you sell IPO shares within a year of the issue, you will have to pay a short-term capital gains tax of 10 per cent on the gains.

-- If you sell the shares after a year of purchase, you will have to pay a long-term capital gains tax. The good news is that long term gains are tax free as per current tax laws.

Tax on dividend

Dividend income you receive on shares is tax free in your hands.

Also read:

• Tax first, salary later
• FAQs on tax

Photograph: Chris Hondros/Getty

Disclaimer: The contents of the article or are for information purpose only and are in no way meant to be advisory in nature. The author does not claim responsibility for actions taken by readers on the basis of the Article. Please consult your financial advisor for your personal money management.

e-mail: Team Wealth

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