A capital gain arises when you sell an investment for a higher price than your cost basis (what you originally paid, including brokerage costs). If you sell for less than your cost basis, you realise a capital loss.
In Sri Lanka, gains from trading listed securities on the CSE are not subject to capital gains tax for most individual investors under current legislation, making the CSE attractive compared to some other markets. However, tax law changes, so investors should verify the current position with a qualified tax professional before making decisions.
Short-term versus long-term holding periods can affect tax treatment in some jurisdictions. While Sri Lanka currently does not impose CGT on CSE shares, the distinction matters for investors with other investments, foreign income, or corporate structures.
Capital gains represent one of the two primary return components for equity investors (the other being dividend income). Building a strategy that balances expected capital appreciation with income generation is a core aspect of portfolio construction.