Capital gains are the profits that an investor realizes when he or she sells the capital asset for a price that is higher than the purchase price.
The formula for capital gain is:
Sale Price – Purchase Price = Capital Gain
Example:- Sale price is 1,50,00,000, Purchase price is 1,00,00,000. 1,50,00,000-1,00,00,000=50,00,000 (now you have to pay gain tax of 50,00,000).
Note that this formula assumes the sale price is higher than the purchase price. If an investor sells an asset for less than he or she paid, this is called a capital loss, and no tax is owed.