Whenever a capital asset is sold for a profit it attracts Capital Gains Tax. Property, stocks, bonds, mutual funds, coin collection, art, precious metals are all examples of capital assets. In order to arrive at the gain or loss of a capital asset, the cost price along with all incidental expenses like fees, taxes and commission are subtracted from the selling price. Capital gains tax rate is more on the profit which is made from an asset which is sold within a year of its purchase, and is called a short term investment, whereas profit from a long term investment held for more than a year is charged less.
There are instances when there can be tax free capital gains. The main example being the profit from the sale of the main residence of an individual or a married couple. Although here a capital asset is being sold for a profit, it does not attract Capital Gains Tax. There are certain conditions to be fulfilled for this to happen. Firstly, the house that is sold should be the main residence of the seller. If the seller happens to have two houses it should be proved beyond doubt that the house sold was the main dwelling place of the seller. Also the individual or couple should have lived in that house for at least two years. In such a sale only there will be tax free capital gains.
Another case when there will be tax free capital gains is when a long term investment is sold for a profit by individuals falling under the lowest two, income tax brackets. People who come under the 10% and 15% income tax brackets, can make a profit on sale of stock held for more than a year, without being taxed for capital gains.
Tax free capital gains is also possible on tax-deferred investments. In order to secure their future many people invest in mutual funds, stocks and bonds, via a retirement account which is tax deferred. Some of the examples of tax deferred accounts are 401(k) plans, IRA (Individual Retirement Accounts) and Roth IRA. The profits on these investments are not taken to capital gains although they are accruing from stock. The income is tax free capital gains until you make a withdrawal. Also when certain requirements are fulfilled, withdrawal from Roth IRA is tax free.
In United Kingdom the profits from sale of UK Government Gilts are tax free capital gains, and so each country has certain items which are tax free capital gains.