COST INFLATION INDEX
- Cost Inflation Index (CII) is used to calculate inflation adjusted purchase cost of any capital asset. Such calculation is necessary where any person derives a long term capital gain on sale of a capital asset.
- Income Tax Act, 1961 lays down the period of holding necessary for a capital asset to qualify as long term capital asset:-
|
Nature of capital asset |
Period of holding |
|
Immovable property being land or building or both |
Above 24 months |
|
Any security listed on recognized stock exchange in India |
Above 12 months |
|
Units of UTI or equity oriented funds |
Above 12 months |
|
Zero Coupon Bonds |
Above 12 months |
|
Other capital assets |
Above 36 months |
- If a capital asset is classified as long term capital asset, any capital gain derived on transfer of such asset shall be calculated as below:-
|
Long Term Capital Gain:- Sales Consideration less transfer expenses Less: Indexed cost of acquisition Indexed cost of improvement |
xxx
xxx xxx |
|
|
xxx |
-
Indexed cost of acquisition:-
Cost of acquisition x CII for the year in which asset is transferred/CII of the year in which asset is acquired
-
Indexed cost of improvement:-
Cost of improvement x CII for the year in which asset is transferred/CII of the year in which asset improvement takes place
- Therefore, CBDT needs to notify CII for every financial year looking into the effect of inflation. For Financial Year 2020-21, CII has been notified by CBDT to be 301.
- Thus, it is necessary that we must first look into CII before calculating the capital gain tax liability.
- Cost Inflation Index notified for various years:-
|
Financial Year |
Cost Inflation Index |
| 2021-22 | 317 |
|
2020-21 |
301 |
|
2019-20 |
289 |
|
2018-19 |
280 |
|
2017-18 |
272 |
|
2016-17 |
264 |
|
2015-16 |
254 |
|
2014-15 |
240 |
|
2013-14 |
220 |
|
2012-13 |
200 |
|
2011-12 |
184 |
|
2010-11 |
167 |
|
2009-10 |
148 |
|
2008-09 |
137 |
|
2007-08 |
129 |
|
2006-07 |
122 |
|
2005-06 |
117 |
|
2004-05 |
113 |
|
2003-04 |
109 |
|
2002-03 |
105 |
|
2001-02 |
100 |
