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Capital gains are basically profit derived from the sale of assets. A capital gain relates to profit resulting from the sale of an asset, including a bond, stock or other capital asset. A capital gain is also referred to as a profit on sale and is sometimes known as surplus.
A capital gain on the part of a taxpayer is different from other types of income. It relates to the amount of profit that accrues over the period that the asset is held by the taxpayer. The profit generated from a bond transaction is much more than a profit on the sale of other kinds of financial instruments. An example is the sale of stock shares.