Capital Gain or Loss

Capital gain or loss occurs when you sell an asset such as a stock or property for a price higher or lower than the purchase price. If you sell it at a higher price, the profit you make is considered as capital gain. On the other hand, if you sell it at a lower price, the loss is considered as capital loss. These gains and losses affect the overall earnings and performance of a trader and also the investment value.

How Capital Gain or Loss Works?

Capital gains can either be realised or unrealised. A realised gain occurs when traders sell the asset and gain profit. Unrealised gain happens when the investment value increases but it has not yet been sold. Similarly if the value of an asset drops below the price it was purchased at but is not sold,.it is an unrealised loss.

Key Points to Remember

• If the investment has grown in value, it is a capital gain. If the investment has less value, then it is a capital loss.
• Stocks and equity funds are treated as long-term investments if retained for over one year.

Example

A simple example is, suppose If you purchase a share at Rs.100 and later the market price goes up to Rs.120 then here, you have a capital gain or profit of Rs.20. But, if the price drops to Rs.80, then you have a capital loss of Rs.20.

Conclusion

By understanding capital gain and loss traders can make better financial decisions. Tracking your investments and also knowing when you should sell them will help you increase your profits and also reduce any possible losses. By investing wisely traders can improve their financial growth curve and attain financial stability over time.