Cost Inflation Index

What is Cost Inflation Index (CII)

Cost Inflation Index is the index used for calculation of Long Term Capital Gains under Income Tax. It is mainly due to inflation that any item which was of say Rs. 100/- 10 years back may not be available at same price presently. Therefore, govt. introduced CII for calculation of long term capital gains after giving some effect of inflation.

Cost Inflation Index for 2021-22

CII is being notified by govt. for each year, for using the same in calculation of Long Term Capital Gains. Cost Inflation Index for 2021-22 is 317 as notified by govt. on 15.06.2021 vide notificaton no. 73/2021.

Cost Inflation Index Table

Table having CII of all the financial years starting from 2001-02 is given below :

FYCIIFYCIIFYCIIFYCII
2001-021002007-081292013-142202019-20289
2002-031052008-091372014-152402020-21301
2003-041092009-101482015-162542021-22317
2004-051132010-111672016-17264
2005-061172011-121842017-18272
2006-071222012-132002018-19280

Calculation of Long Term Capital Gain using CII

From the sale value of a long term capital asset, the indexed cost of acquisition is deducted to get long term capital gain. To calculate indexed cost of acquisition, the actual Cost of acquisition is divided by the CII of the year of purchase and then multiplied by the CII of the year of sale. Section 48 covers above provisions.

For example, a land was purchased for Rs. 100000/- on 01.05.2012 and sold on 10.04.2021 for Rs. 500000/-. Now, the CII of 2012-13 is 200 and of 2021-22 is 317. So, the indexed Cost of acquisition will be (100000/200) x 317 = Rs. 158500/-. Hence, the capital gain will be 500000 – 158500 = Rs. 341500/-.

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