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Capital gain
Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares.
A capital gain is only possible when the selling price of the asset is greater than the original purchase price. In the event that the purchase price exceeds the sale price, a capital loss occurs. Capital gains are often subject to taxation, of which rates and exemptions may differ between countries. The history of capital gain originates at the birth of the modern economic system[citation needed] and its evolution has been described as complex and multidimensional by a variety of economic thinkers. The concept of capital gain may be considered comparable with other key economic concepts such as profit and rate of return; however, its distinguishing feature is that individuals, not just businesses, can accrue capital gains through everyday acquisition and disposal of assets.
The history of capital gain in human development includes conceptualizations from pre-1865 slave capital in the United States, to the development of property rights in France in 1789, and even other developments much earlier. The official beginning of a practical application of capital gain occurred with the development of the Babylonian's financial system circa 2000 B.C. This system introduced treasuries where citizens could deposit silver and gold for safekeeping, and also transact with other members of the economy. As such, this allowed the Babylonians to calculate costs, sale prices and profits, and hence capital gains.
Capital gain is generally calculated through taking the sale price of an asset and subtracting its base cost and any incurred expenses. The resulting value will be the capital gain, or capital loss if negative. In reality, many governments provide supplementary methods of calculating capital gains for both individuals and businesses. These methods can provide taxation relief through lowering the calculated capital gain value.
The Australian Taxation Office (ATO) lists three methods of calculating capital gain for Australian citizens and businesses, each one designed to lower the final resulting value of the eligible party's gain. The first is the discount method, whereby eligible individuals or super funds may reduce their stated capital gain value by 50% or 33.33% respectively. The second is the indexation method, which allows individuals and firms to apply an index factor to increase the base cost of the asset, thereby decreasing the final capital gain value. The third is the ‘other’ method, and involves use of the general capital gain formula whereby the base costs of the asset are subtracted from its final sale price.
The Canada Revenue Agency (CRA) includes several unique guidelines for calculating individual or business capital gain. The CRA states that individuals may exclude from their capital gains calculation the following types of donations: “shares in the capital stock of a mutual fund corporation… prescribed debt obligations that are not linked notes, ecologically sensitive land… (or) a share, debt obligation, or right listed on a designated stock exchange”. Note that for the exclusion to be approved the donation must be to a qualified donee, and also that capital losses arising from such donations are not eligible to be excluded from an individual's reporting. The CRA states that following a capital gain, individuals may be able to either claim a reserve or claim a capital gains deduction. Individuals are eligible to claim a reserve when the capital gain does not occur as one lump-sum payment but rather a series of payments over time. In order to calculate the reserve, Canadian individuals must calculate their capital gain via the regular sale price minus cost price method, and subsequently subtract the amount of approved reserve for the year. A capital gains deduction is the second form of capital gain calculation which the CRA offers. It is “a deduction that you can claim against taxable capital gains you realized from the disposition of certain capital properties”. Only residents from Canada throughout the previous year are eligible to claim the deduction, and only certain capital gains are eligible for the deduction to be applied.
The German tax office levies different capital gains tax based on the asset you sold and the holding period. Taxpayers in Germany, pay a flat 25% (2024) capital gains tax on their profits from selling the stocks plus solidarity surcharge of 5.5% (2024). If the individual is a church member, they also pay church tax. In the end the total capital gains tax is 27.82% in Baden-Württemberg and Bavaria, and 27.99% in all other federal states. Taxes on the sale of real estate are completely different from that of stocks. If you hold the property for more than ten years, you can sell it tax-free in Germany. Similarly, you can sell the property tax-free if you lived in it yourself for at least two years. However, you pay taxes based on your personal tax rate if you don't meet any of the tax-free criteria.
In Pakistan, capital gains are computed by subtracting the asset’s adjusted cost (including any allowable improvement expenses) from its disposal proceeds under the Income Tax Ordinance, 2001. The tax rate applied depends on the type of asset, its acquisition date, and the holding period. For example, listed securities acquired on or after 1 July 2024 are generally subject to a flat 15% tax. While prior to that, shorter holding periods attracting higher rates and longer holdings sometimes qualifying for reduced rates or exemptions. Likewise, gains on immovable property are taxed on a sliding scale—short-term gains incur higher rates, while those from assets held over a longer period benefit from progressively lower rates or full exemptions.
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Capital gain
Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares.
A capital gain is only possible when the selling price of the asset is greater than the original purchase price. In the event that the purchase price exceeds the sale price, a capital loss occurs. Capital gains are often subject to taxation, of which rates and exemptions may differ between countries. The history of capital gain originates at the birth of the modern economic system[citation needed] and its evolution has been described as complex and multidimensional by a variety of economic thinkers. The concept of capital gain may be considered comparable with other key economic concepts such as profit and rate of return; however, its distinguishing feature is that individuals, not just businesses, can accrue capital gains through everyday acquisition and disposal of assets.
The history of capital gain in human development includes conceptualizations from pre-1865 slave capital in the United States, to the development of property rights in France in 1789, and even other developments much earlier. The official beginning of a practical application of capital gain occurred with the development of the Babylonian's financial system circa 2000 B.C. This system introduced treasuries where citizens could deposit silver and gold for safekeeping, and also transact with other members of the economy. As such, this allowed the Babylonians to calculate costs, sale prices and profits, and hence capital gains.
Capital gain is generally calculated through taking the sale price of an asset and subtracting its base cost and any incurred expenses. The resulting value will be the capital gain, or capital loss if negative. In reality, many governments provide supplementary methods of calculating capital gains for both individuals and businesses. These methods can provide taxation relief through lowering the calculated capital gain value.
The Australian Taxation Office (ATO) lists three methods of calculating capital gain for Australian citizens and businesses, each one designed to lower the final resulting value of the eligible party's gain. The first is the discount method, whereby eligible individuals or super funds may reduce their stated capital gain value by 50% or 33.33% respectively. The second is the indexation method, which allows individuals and firms to apply an index factor to increase the base cost of the asset, thereby decreasing the final capital gain value. The third is the ‘other’ method, and involves use of the general capital gain formula whereby the base costs of the asset are subtracted from its final sale price.
The Canada Revenue Agency (CRA) includes several unique guidelines for calculating individual or business capital gain. The CRA states that individuals may exclude from their capital gains calculation the following types of donations: “shares in the capital stock of a mutual fund corporation… prescribed debt obligations that are not linked notes, ecologically sensitive land… (or) a share, debt obligation, or right listed on a designated stock exchange”. Note that for the exclusion to be approved the donation must be to a qualified donee, and also that capital losses arising from such donations are not eligible to be excluded from an individual's reporting. The CRA states that following a capital gain, individuals may be able to either claim a reserve or claim a capital gains deduction. Individuals are eligible to claim a reserve when the capital gain does not occur as one lump-sum payment but rather a series of payments over time. In order to calculate the reserve, Canadian individuals must calculate their capital gain via the regular sale price minus cost price method, and subsequently subtract the amount of approved reserve for the year. A capital gains deduction is the second form of capital gain calculation which the CRA offers. It is “a deduction that you can claim against taxable capital gains you realized from the disposition of certain capital properties”. Only residents from Canada throughout the previous year are eligible to claim the deduction, and only certain capital gains are eligible for the deduction to be applied.
The German tax office levies different capital gains tax based on the asset you sold and the holding period. Taxpayers in Germany, pay a flat 25% (2024) capital gains tax on their profits from selling the stocks plus solidarity surcharge of 5.5% (2024). If the individual is a church member, they also pay church tax. In the end the total capital gains tax is 27.82% in Baden-Württemberg and Bavaria, and 27.99% in all other federal states. Taxes on the sale of real estate are completely different from that of stocks. If you hold the property for more than ten years, you can sell it tax-free in Germany. Similarly, you can sell the property tax-free if you lived in it yourself for at least two years. However, you pay taxes based on your personal tax rate if you don't meet any of the tax-free criteria.
In Pakistan, capital gains are computed by subtracting the asset’s adjusted cost (including any allowable improvement expenses) from its disposal proceeds under the Income Tax Ordinance, 2001. The tax rate applied depends on the type of asset, its acquisition date, and the holding period. For example, listed securities acquired on or after 1 July 2024 are generally subject to a flat 15% tax. While prior to that, shorter holding periods attracting higher rates and longer holdings sometimes qualifying for reduced rates or exemptions. Likewise, gains on immovable property are taxed on a sliding scale—short-term gains incur higher rates, while those from assets held over a longer period benefit from progressively lower rates or full exemptions.