Definition of Capital Gain or Loss

The profit or loss that results through the sale of certain assets is classified as a capital gain or loss. It encompasses stocks and other investments - like investment property.

The capital loss or gain could be both long-term or short-term. Capital gain is of two types - realized and unrealized. The gain on an investment that was sold for some profit, is the realized capital gain. Unrealised capital gain refers to the gain on an investment that is not sold but is to be transacted later.

Points to remember

• When the value of a capital asset, like an investment, decreases compared to its cost of acquisition, it is called capital loss. When the value increases, it is referred as capital gain.
• Equity funds and shares are long-term capital assets when they’re held for more than a year.

Example
If an individual purchases the stock of XYZ Company at Rs.100 per share and the price rises to Rs. 120. Then, the capital gain for the investor is Rs. 20.