What is a capital gain?
When you sell an asset, such as shares, land or gold, for more than you paid, the difference is a capital gain. Sell for less and it is a capital loss. A share’s return comes from two places: dividends and this change in price. Many companies pay small dividends or none at all, and then almost all of the return depends on the price going up.
Until you sell, the gain exists only on paper; this is an unrealised gain. If the price falls tomorrow, it can vanish. Only when you sell and the money arrives does the gain become “realised”, and that is usually when tax comes into the picture too.
Say Mr Kamal buys a cow for Tk 60,000 before one Eid, raises it for some months and sells it at the next Eid for Tk 80,000. It looks like a Tk 20,000 profit. But if feed, medicine and the cost of getting it to market came to Tk 8,000, the real profit is Tk 12,000. And had prices at the market fallen to Tk 65,000, the “profit” he had before selling would have existed only in his head. Capital gains on shares need the same thinking. The person and numbers are made up.
Why it matters to an investor
- To know your real profit: only after taking out commission and other charges on buying and selling can you see what you really made or lost.
- Not to be fooled by paper gains: until you sell, nothing is locked in, and share prices can change fast.
- To keep your sums right after bonus shares: when the number of shares rises, the cost per share falls; ignore that and your gains and losses look wrong.
- To know the tax rules: which gains are taxed and which are tax-free is set by law and changes over time.
Getting your cost right
- Cost of buying = price × number of shares + broker commission and other charges. Money from selling = sale price × number − commission and charges. The gain is the difference between the two.
- Buying in several lots gives an average cost: total cost ÷ total shares. Buy some at Tk 50 and some at Tk 40 and your average cost lies somewhere in between.
- With bonus shares, your total cost stays the same while the shares increase, so the cost per share falls. Buying rights shares adds new money to your cost.
- Dividends are separate income. Add the dividends you received to the capital gain to see your total return, but do not mix the two up.
Tax rules in Bangladesh (they can change)
Under the Income Tax Act 2023 and an NBR change of November 2024, an individual’s gains from selling listed shares are tax-free up to Tk 50 lakh (Tk 5 million) a year; above that they are taxed at 15%, and a surcharge can be added for wealthier taxpayers. Reviews show this rule still in place in mid-2026. Sponsor, director and placement shares follow different rules.
The threshold and rate can change in any budget and Finance Act, and have changed many times before. Gains on land, flats or unlisted shares follow completely different rules. So check the current year’s law before a large transaction. On top of this, a small tax on the transaction value is deducted at source on every trade and shows on your broker’s bill.
Worked example
- Say you buy 1,000 shares at Tk 50: Tk 50,000. Assume a 0.4% commission, Tk 200. Total cost: Tk 50,200.
- The company gives 10% bonus shares: you now hold 1,100. Total cost is unchanged, so the cost per share is Tk 50,200 ÷ 1,100 ≈ Tk 45.64.
- Later you sell them all at Tk 50: Tk 55,000, less 0.4% commission of Tk 220. You receive Tk 54,780.
Result: capital gain = Tk 54,780 − Tk 50,200 = Tk 4,580, about 9%. The buying and selling prices were the same (Tk 50), which looks like “no profit”, but there was a gain because the price climbed back to Tk 50 after the bonus. The other way round, if the price had stayed around Tk 45 after the bonus, it would look as if “the price fell” while you were in fact roughly even. The numbers are only an example.
Common mistakes
- Treating a paper gain as certain and planning to spend it before selling.
- Working out gains without commission and charges, especially when trading often, where costs pile up fast.
- Not adjusting the cost per share after bonus shares, so gains and losses look wrong.
- Holding on to losing shares just so the loss never becomes “real”. An unsold loss is still a loss.
Measure a capital gain after all costs, adjusted for bonus shares, and once you have sold: before that, the profit exists only on paper.