What Is a Capital gain?

What is a Capital Gain?

Any profit or gain that arises from the sale of a ‘capital asset’ is a capital gain. This gain or profit is charged to tax in the year in which the transfer of the capital asset takes place.

Capital gains are not applicable when an asset is inherited because there is no sale, only a transfer. However, if this asset is sold by the person who inherits it, capital gains tax will be applicable. The Income Tax Act has specifically exempted assets received as gifts by way of an inheritance or will.