Paper Profit refers to an unrealised gain on an investment that exists only on paper—i.e., the current market value of the investment exceeds the purchase price, but the position has not yet been sold to lock in the gain. Paper profits fluctuate with market conditions and can erode quickly if prices move adversely. From a tax perspective in India, paper profits are not subject to capital gains tax until the position is actually sold. Investors must distinguish between paper profits and realised profits when assessing their true financial position.
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