Unrealized Gain refers to the potential profit an investor holds on paper from an investment that has increased in value but has not yet been sold. In simpler terms, it is the difference between the current market price of an asset and its purchase price, as long as the investor continues to hold it. For instance, if you bought shares worth _10,000 and their value rises to _12,000, the _2,000 increase is your unrealized gain — also known as a “paper gain.”

Understanding unrealized gains is essential for investors because it helps track the performance of their portfolio without triggering any tax liabilities. These gains remain unrealized until the asset is sold. Once a sale occurs, the gain becomes “realized” and may be subject to capital gains tax, depending on the holding period and asset type. Therefore, recognizing the distinction between realized and unrealized gains is crucial for effective financial planning and tax management.

From an accounting and investment perspective, unrealized gains reflect market volatility and potential future profits. Investors often monitor these gains to evaluate whether to hold or exit a position based on market conditions, risk tolerance, and long-term goals. However, since market prices fluctuate, unrealized gains can quickly turn into unrealized losses if the asset’s value declines before sale.

In summary, unrealized gains serve as an important indicator of portfolio health, helping investors make informed decisions without immediate financial implications. Tracking these gains regularly allows investors to assess market performance, rebalance portfolios when necessary, and plan strategically for tax-efficient outcomes—all while complying with SEBI’s investor protection and disclosure norms.