Capital Gain is the profit earned from the sale of a capital asset, such as stocks, bonds, real estate, or mutual funds, when the selling price exceeds the purchase price. It is a key concept in investment and taxation, helping investors understand the financial outcome of their asset transactions and plan for tax liabilities. Understanding capital gains is essential for investors, financial planners, and taxpayers in India and globally.

Capital gains are broadly classified into two types based on the holding period of the asset. Short-term capital gains (STCG) arise when an asset is held for a short duration before sellingótypically less than 12 months for equities and mutual funds in India. Long-term capital gains (LTCG) occur when the asset is held for a longer period, such as over 12 months for equities or 36 months for other assets. Tax rates differ for STCG and LTCG, making this distinction important for financial planning.

For example, if an investor buys shares of a company at ?500 per share and sells them later at ?700 per share, the capital gain is ?200 per share. If the shares were held for less than a year, STCG tax applies; if held longer, LTCG tax may be applicable, subject to exemptions and thresholds under Indian tax laws.

Capital gains play a significant role in investment strategy and wealth management. Investors often plan entry and exit points for assets to optimize gains while minimizing tax liabilities. They may also use instruments like Capital Gains Accounts Scheme (CGAS) or invest in specified bonds to defer or reduce tax payments, in line with regulatory provisions.

From a regulatory perspective, the Income Tax Act, 1961, governs the taxation of capital gains in India, and SEBI ensures transparency in securities markets. Accurate calculation, reporting, and compliance are crucial for investors to avoid penalties and make informed financial decisions.

In summary, capital gain is the profit earned from selling a capital asset above its purchase price. Understanding short-term and long-term capital gains, tax implications, and strategic planning is essential for investors to maximize returns, comply with regulations, and manage wealth effectively.