# What are Unrealized Gains & Loses?

## What are unrealized gains or losses?

Unrealised gains are generally defined as an increase in value of an investment such as stock or security you own but haven’t sold off. An unrealised loss is a decrease in value, such as a stock, security, or other investment that you don't sell off yet.

The stock market would show a significant change in value after you have purchased it. Any gains or losses in the stock's value will be considered unrealised until you have it in your portfolio.

Unrealized gains can be described as potential profits that are sitting in your account. Therefore, the values are always positive and usually shown in green. Unrealized losses can also be considered potential losses. Therefore, they are represented in red.

## ExamplesUnrealized Gains and Losses

Let's look at some examples to help you better understand this concept.

## An example ofunrealized gains.

Let's say you decide to buy a share in HDFC Bank Limited, for Rs. 1,100 Let's suppose the share price closes at Rs. 1,150 You would still be able to keep the share in your trading account. The unrealized gain in the trading account would then show up at Rs. 50 (Rs. 50 (Rs. 1,150 - Rs. On the third day, the share price increases even more and closes at Rs. 1,200 This increase would also be reflected in the unrealized gain in trading account. It would appear as Rs. 100 (Rs. 100 (Rs. 1,200 - Rs.

## Unrealized losses

Let's say you decide to buy a share in Yes Bank Limited for Rs. 30. Let's say that the share price closes around Rs. two days later. 25. You would still be able to keep the share in your trading account. The unrealized loss in the trading account would then show up at Rs. 5 (Rs. 5 (Rs. 30) at the end of day 2. The third day is when the share price drops further to Rs. 20. The unrealized loss in trading accounts would reflect this decrease, and would be shown as Rs. 10 (Rs. 10 (Rs. 30

## Tax implications forlosses and gains

The 1961 Income Tax Act defines capital gains as any profit made from the sale of securities or stocks. These profits are subject to taxation.

Similar to previous points, capital losses are any losses you incur through the sale or transfer of securities and stocks.

However, regardless of the size of unrealized gains or losses, there is no tax impact whatsoever. Unrealized gains or losses are not actual profits or losses. To be considered a capital gain, or loss, a sale must be made and the asset transferred.

## Conclusion

Capital gains and losses, as well as their taxation, are only applicable when the gains or losses are realized by selling or transferring the asset. Many investors choose to keep their gains unrealized and opt for a staggered selling strategy to reduce their capital tax burden.

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