Updated on: 19.06.2022.
Cost Inflation Index number is referred to while calculating the Indexed cost of acquisition of a capital asset, which further helps in calculation of the long-term capital gains tax.
The complete process is called as Indexation, where the cost price of a capital asset is adjusted with the impact of Inflation using the cost Inflation Index number, which is announced by the Central government every financial year.
What is Cost Inflation Index / Capital gain Index?
Cost Inflation Index or as some people call it Capital gain Index is announced by the central government for every financial year, after referring to the CPI (Consumer Price Index) for the immediately preceding year.
While calculating long-term Capital gains tax government has allowed adjusting the cost price of the capital asset with the inflation numbers through Cost Inflation Index, and come up with the Indexed cost of acquisition of that capital asset.
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Cost Inflation Index table or Indexation table
From FY 2017-18, the base year of cost inflation index has been changed to 2001.
Below is the cost inflation index table with data till FY 2021-22
| Financial year | CII | Financial Year | CII |
| 2001-2002 | 100 | 2011-2012 | 184 |
| 2002-2003 | 105 | 2012-2013 | 200 |
| 2003-2004 | 109 | 2013-2014 | 220 |
| 2004-2005 | 113 | 2014-2015 | 240 |
| 2005-2006 | 117 | 2015-2016 | 254 |
| 2006-2007 | 122 | 2016-2017 | 264 |
| 2007-2008 | 129 | 2017-2018 | 272 |
| 2008-2009 | 137 | 2018-2019 | 280 |
| 2009-2010 | 148 | 2019-2020 | 289 |
| 2010-2011 | 167 | 2020-2021 | 301 |
| 2021-2022 | 317 |
The Cost Inflation Index for FY 2022-23 (AY 2023-24) is 331.
How to calculate the Indexed cost of acquisition?
Indexed cost of acquisition: (Purchase cost/CII of the year of purchase)*CII of the year of sale
(Also Read: How to save capital gains tax on the sale of property?)
How to calculate Long-term capital gains tax with capital gain index
After knowing the Indexed cost of acquisition on applying the cost inflation index, it is now easy to calculate the Capital gain and Tax on the same.
Conclusion:
Cost inflation index is used to calculate the Indexed cost of acquisition which further helps in coming with the capital gains taxation. This calculation applies to all capital assets except Listed Equity shares (for Stock market transactions) and Equity Mutual funds.
Thank you sir for explaining with example cost inflation index but if we hv taken depreciation on that long term property than how to calculate long term capital gain..pls explain
Long-term capital gain is the difference between buying price and selling price. It does not take into account your internal accounting depreciation, however, Indexation can be construed as adjusting for depreciation from inflation.
Hello,
I have inherited property in 2007 at a value of 8.00 lacs. Recently sold (AY 2018-19) for 47 lacs. How do we calculate Cost of Inflation index? Do we have to use both the CII charts (old and new)?
Old CII numbers have become redundant now. So you have to get Approved Government Valuer involved and get the property valued for 01.04.2001 and then use the new CII Chart to calculate the taxes.
sir,
My friend has purchased land(not agricultural) from his relative in the FY 1998-99 (CII-351) for 34k and sold in FY 2017-18(CII-272) for 17 lakhs..It clear that if we calculate based on the above formula,Indexed cost of aquisition will be lower than the actual cost of aquisition.
Kindly advise on this.
The OLD CII numbers have been scrapped and now the base starts from 2000-2001.
You need to get your Land valued as on year 2000 from approved government valuer and then use the current CII numbers to calculate the Indexed cost of acquisition.
Out of capitel gain amount can I deposit 50 lakhs in bonds and with remaining amount can I buy an apatrment
Does indexation play a role in computing capital loss? Consider a case where I am selling investments in 5 mutual fund schemes. In 4 of these, I stand to gain. Therefore for these, I compute the gains after indexing the cost. In the 5th case however, I make a loss. Am I required to index the cost of this investment too. If I do, then the capital loss amount would reduce and may not be sufficient to set off against the gains made in the other 4 sale transactions.
In short, does indexation have any role to play in computing long term capital loss or is this computed simply by subtracting the original acquisition price (without indexing) from the sale price and used as loss in case the result is negative.
Many thanks for your advice.
In Non-Equity Mutual funds, to calculate capital gains, Indexation is mandatory, its not a choice. So in gain or loss, you have to do Indexation and pay/adjust taxes on indexed gain/loss
What is the effect on LTCG when the price at which i sold my property is less than the indexed cost of buying ? Can i offset this ‘loss’ against any LTCG from other sources ?
Yes, as per income tax act you may set off the Long term capital loss can only be set off with the long term capital gains, not against any income from other heads.
After i calculate my long term cap gain tax by indexing how do i find my tax liability? Thanks
Your tax calculation is your tax liability only, right? or am I missing something?
Son plan to buy a flat from seller who inherited share of land plus building in 1959.how to arrive the indexed value?
You have to appoint a registered valuer who would help you ascertain the fair value of the property as on 1st April 2001, which you may index by using the Cost Inflation Index numbers. CII for the base year i.e. 2001 would be taken as 100. In some cases, the Valuer himself tells you the indexed cost itself.
I bought my house in 1984 for 179, 000 dollars I sold it for 1,050,000 in 2020. When factoring CIT and whatever other variables should be included what should I expect my long term capital gains tax to be.
I live in CA. I owe to both the state and the feds. I am eligible for 500,000 tax benefit as I am married and will claim jointly. Can you give me a ballpark figure. I lived in the home for thirty five years and only have receipts for major projects, new roof, new kitchen and bath, windows, retaining walls and decks. That totals about 80,000. I do not know how to calculate depreciation or how that would be helpful. I would appreciate your assistance.
Thanks for your query Mr Brown…But this article pertains to Indian Tax Rules, so does not apply in your case. You will have to consult some tax expert in your country.