The Cost Inflation Index (CII) is a measure used by the Income Tax Department of India to account for inflation when calculating long-term capital gains on the sale of assets. It was a critical tool for taxpayers it helped reduce the tax burden on capital gains by adjusting the asset"s purchase price for inflation. However, an announcement during Finance Minister Nirmala Sitharaman"s Budget 2024 speech made it redundant.
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In her seventh straight Union Budget speech, Sitharaman announced changes to the capital gains tax rates. The short-term capital gain tax rate on "specified" assets was increased to 20 percent from the previous 15 percent. She added that all other financial and non-financial assets will be taxed at the applicable rates. She also revised long-term capital gains tax rates, raising them from 10 percent to 12.5 percent for all assets while increasing the exemption limit for capital gains on some listed financial assets from Rs1 lakh to Rs1.25 lakh per year.
She also announced that the indexation benefit for property sales would be removed. This move implies that people selling their property can no longer adjust their purchase price using inflation. This will reduce their capital gains and increase their tax liability, and it has made the cost inflation index redundant.
The cost Inflation Index used to be important for anyone dealing with assets that can appreciate over time. It allowed you to calculate your capital gains and the tax due on them accurately, ensuring you don"t pay more tax than necessary.
Cost Inflation Index for the Financial Year 2024-25
The CBDT (Central Board of Direct Taxes) used to release the CII annually to help calculate the indexed acquisition cost for assets sold during the financial year. The Cost Inflation Index (CII) for the financial year 2024-25 was 363. However, with the new amendments, CBDT will no longer release the CII.
Cost Inflation Index historical data: From 2001 to 2024
The base year for the Cost Inflation Index was changed from 1981 to 2001 by the CBDT. This means that the CII for the financial year 2001-02 is considered 100, and the indices for subsequent years are calculated relative to this base.
Here is the Cost Inflation Index (CII) from FY 2024-25 to FY 2001-02:
