Cost Inflation Index (CII) and Capital Gains

By | July 3, 2015

Cost Inflation Index (CII) plays very important role in calculations of capital gains. Capital gain is calculated after deduction indexed cost of acquisition; once we apply the CII then the cost of acquisition becomes indexed cost of acquisition.

Cost Inflation Index means such index which notified by the central government, having regard to 75% of consumer price index for urban non employees for the previous year. Here are CII till financial year 2014-15.

Recently CBDT has shifted the base year for the purpose of CII from 1981-82 to 2001-01. The value of CII below in RED appears to be new CII.

 CII Chart

Financial Year CII Financial Year CII
1981-82 100 2000-01 406
1982-83 109 2001-02 426 / 100
1983-84 116 2002-03 447 / 105
1984-85 125 2003-04 463 / 109
1985-86 133 2004-05 480 / 113
1986-87 140 2005-06 497 / 117
1987-88 150 2006-07 519 / 122
1988-89 161 2007-08 551 / 129
1989-90 172 2008-09 582 / 137
1990-91 182 2009-10 632 / 148
1991-92 199 2010-11 711 / 167
1992-93 223 2011-12 785 / 184
1993-94 244 2012-13 852 / 200
1994-95 259 2013-14 939 / 220
1995-96 281 2014-15 1024 / 240
1996-97 305 2015-16 1081 / 254
1997-98 331 2016-17 1125 / 264
1998-99 351 2017-18 272
1999-00 389

Formula to calculate Indexed Cost of Acquisition is as follows

Indexed Cost of Acquisition = Cost of Acquisition x CII for the year of sale                                                                                                                                     CII for the year of purchase

How this works in capital gains?

CII will be used while calculating the capital gain for long term capital. Let’s try to understand the calculation by following example.

Mr. A, who has purchased the residential property on 01 April 2009 for Rs. 42,00,000/-. Mr. A wants to see the property, the sale agreement was done on 31 March 2015 for Rs. 95,00,000. Following the calculation of capital gains on sale of such property;

Total Sales Consideration                                                                                 Rs. 95,00,000

Less : Indexed Cost of Acquisition                                                                  Rs. 68,05,063

Cost of Acquisition x CII for FY 2014-15

CII for FY 2009-10

{Rs. 42,00,000 x (1024/632)}

Long Term Capital Gains                                                                          Rs. 26,94,934

 

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