As the name suggest, the Capital gain tax is a tax levied upon the gain received in capital. If an individual sells property, bonds, shares or precious material etc. and earn profit on it, then with a given frame time he or she should pay capital gain tax. Capital gain is the difference between the capital received from selling of such assets and the price paid for the purchase of the same. Capital gain tax is further divided into as short term gain and long term gain. The Rate at which this tax is applied varies from item to item based on investment class.