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What is the Cost Inflation Index ?

cost inflation index

What is the Cost Inflation Index ?

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You can save substantial amount of Income tax on your long-term capital gains arising out of selling your immovable property if you take advantage of the Cost Inflation Index.

Cost Inflation Index  is a measure of inflation, notified by “The Central Government” for the purpose of calculating long term capital gains on sale of assets. It is not available for short-term capital gains or  losses.

Section 48 of the Income-Tax Act defines the index as what is notified by the Central Government every year, having regard to 75 per cent of average rise in the consumer price index (CPI) for urban non-manual employees for the immediately preceding previous year.

Inflation reflects an erosion in the purchasing power of money. Indexation, while calculating the long term capital gains, helps us to counter the erosion in the value of the asset over a period of time. Cost Inflation Index is notified by the Central Government every year taking 1981-82 as base year.

Calculating Long Term Capital Gain with the help of Cost Inflation Index

A) Sale Consideration                                                                         xxx

Less:

B) Expenses incurred for transfer                                                       xxx

C) Indexed Cost of Acquisition
Cost of Acquisition * CII(Year of Sale)/
CII(Year of Purchase)                                                                         xxx

D) Indexed Cost of Improvement
Cost of Improvement * CII(Year of Sale)/
CII(Year of Purchase)                                                                         xxx

E) LTCG                                                                                              xxx

Table of Cost Inflation Index

Financial Year Cost Inflation Index
2012-2013 852
2011-2012 785
2010-2011 711
2009-2010 632
2008-2009 582
2007-2008 551
2006-2007 519
2005-2006 497
2004-2005 480
2003-2004 463
2002-2003 447
2001-2002 426
2000-2001 406
1999-2000 389
1998-1999 351
1997-1998 331
1996-1997 305
1995-1996 281
1994-1995 259
1993-1994 244
1992-1993 223
1991-1992 199
1990-1991 182
1989-1990 172
1988-1989 161
1987-1988 150
1986-1987 140
1985-1986 133
1984-1985 125
1983-1984 116
1982-1983 109
1981-1982 100

 

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