What is Cost Inflation Index (CII) ?
CII is a measure of inflation that is used for computing Long Term Capital Gains (LTCG) on the sale of capital assets ( A capital asset is defined to include property of any kind held by an assessee, whether or not connected with their business or profession. It includes all kinds of property, movable or immovable, tangible or intangible, fixed or circulating. For example - Land, Buildings, etc).
What is Indexed Cost of Acquisition ?
Indexation means adjustment in the purchase price of capital asset using Cost of Inflation index (CII). This inflated cost is considered as the cost of acquisition while computing the gains or losses arising from the sale of the capital asset .
How to calculate Indexed Cost of Acquisition?
General Rule for calculating Indexed Cost of Acquisition is as follows:
Purchase Cost of the Asset X CII for the year in which the asset is sold
CII for the year in which the asset was first held by the assessee OR F.Y 2001-02 whichever is later
The biggest change from financial year 2018-19 is that the base year is changed from the earlier F.Y. 1981-82 to F.Y. 2001-02.
Following table summarizes the Cost Inflation Index from Financial year 2001-02 upto Financial year 2022-23.
|
Sr. No. |
Financial Year |
Cost Inflation Index |
|
1 |
2001-02 |
100 |
|
2 |
2002-03 |
105 |
|
3 |
2003-04 |
109 |
|
4 |
2004-05 |
113 |
|
5 |
2005-06 |
117 |
|
6 |
2006-07 |
122 |
|
7 |
2007-08 |
129 |
|
8 |
2008-09 |
137 |
|
9 |
2009-10 |
148 |
|
10 |
2010-11 |
167 |
|
11 |
2011-12 |
184 |
|
12 |
2012-13 |
200 |
|
13 |
2013-14 |
220 |
|
14 |
2014-15 |
240 |
|
15 |
2015-16 |
254 |
|
16 |
2016-17 |
264 |
|
17 |
2017-18 |
272 |
|
18 |
2018-19 |
280 |
|
19 |
2019-20 |
289 |
|
20 |
2020-21 |
301 |
|
21 |
2021-22 |
317 |
Example - Mr. Raj has purchased the property in FY 2007-08 for Rs.45 lakh and sold the same in FY 2017-18 at Rs.2 crore. Now the indexed cost of acquisition will be as per above formula i.e.
Purchase Cost of the Asset X CII for the year in which the asset is sold
CII for the year in which the asset was first held by the assessee OR F.Y 2001-02 whichever is later
Indexed Cost of Acquisition=Rs 45,00,000 X252 = Rs.94,88,372.
129
So the Long Term Capital Gain= Selling Price - Indexed Cost of buying property
LTCG = Rs. 2,000,0000 - Rs. 94,88,372 = Rs. 1,05,11,628
Comments
2 comments
Thanks for sharing these details about Cost Inflation Index. I found this quite useful. You have explained it in quite a simple way and will surely be practicing it a couple of times. Actually I am pursuing financial planning course and want to get hold of these things.
One result for "23-06-1993 vignesh R yeshwanthapure 2013
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