> Right, have to use interrupt. So will it be like, choose pulse edge, enable
> interrupt on say rising edge and then turn ON LED?

> But how to turn it OFF when square wave pulse is low?

As BillW said, change the polarity of the edge trigger. If you don't, then
what will happen is that the input frequency will be halved if you use the
interrupt to change the state of the LED, ie only the rising edges will cause
an interrupt and falling edges will be ignored
 
> bsf option_reg, intedg           ; select interrupt on
> rising edge of b0/int pin
> bsf intcon, int0ie           ; enable rb0/int external interrupt
> intchk btfss intcon, rbif                   ; check interrupt flag bit
> goto intchk
> movf portb, 1                   ; end mismatch condition
> bcf intcon, rbif                   ; clear interrupt flag
> bsf portb, 1                   ; turn on led
> btfss intcon, rbif                   ; check rbif bit
> bcf portb, 1                   ; turn off led
> retfie

What you have above is not how it would be done, and is part
polling, part interrupt. What follows is very general, but would work
on basic PICs which have only one INTCON register and a simple
interrupt structure. You can find the interrupt logic tree for any PIC
in its datasheet

Firstly you do the initialisation

bsf option_reg,intedg ;select the edge polarity
clrf intcon ;disable all interrupt sources and clear interrupt flags
bsf intcon,int0ie ;enable just the INT0 interrupt
bsf intcon,gie ;enable the global interrupt

[insert your main-line code here - for example a simple do-nothing wait]

wait

nop
goto wait

Secondly, the ISR (interrupt service routine). This assumes that only the
INT0 interrupt is enabled. No context saving done

bcf intcon,int0if ;clear the flag which caused the interrupt

clrf temp ;toggle the edge polarity bit (better way to do this anyone ?)
bsf temp,intedg,w
xorwf option_reg

btfss option_reg,intedg ;if edge bit = 1, LED on
goto led_off ;else LED off

bsf led ;LED on
retfie ;exit back to 'wait'

led_off

bcf led ;LED off
retfie ;exit back to 'wait'


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