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Cost Inflation Index (CII) for FY 2023-24 (AY 2024-25) - CII Table, Calculation & Examples

Cost Inflation Index (CII) for FY 2023-24 (AY 2024-25) - CII Table, Calculation & Examples

Updated on: 30 Nov, 2024 12:17 PM

Budget 2024 Updates

Amendment to Finance Bill 2024
Earlier, the government removed the indexation benefit on the sale of immovable property. However, the amendment of Finance Bill 2024 introduced a rollback of this rule.
As per the latest amendment, for any immovable property acquired before 23rd July 2024, the taxpayers will have the option to choose between two LTCG computation methods -

12.5% tax rate, without indexation
20% tax rate with indexation benefit.

The taxpayers can compute their tax based on both these methods and select the one that reduces their tax burden.
In other words, now taxpayers will be able to claim the benefit of indexation if they choose to pay tax at 20%. They will also get the opportunity to save tax by choosing the method of computing taxes.
However, there are certain exceptions to this amendment -

Indexation benefit is only available on immovable property like land and buildings.
It is available only to individuals and HUFs and not to firms or companies.
It can be considered only for tax calculation and not for determining amount of investment or loss to claim exemption or carry forward.

Long-term capital gains

Exemption on LTCG has been increased from Rs.1 lakh to Rs.1.25 lakhs per annum.
LTCG rate on all financial as well as non-financial assets has been increased to 12.5%.

Short-term capital gains

STCG on specified financial assets will be charged at 20%.
STCG on other non-financial assets will be taxed at applicable slab rates.
Unlisted bonds and debentures, debt mutual funds, and market linked debentures, irrespective of holding period, however, will attract tax on capital gains at applicable rates.

Securities Transaction Tax (STT)

STT on Futures and options has been increased to 0.02% and 0.01% respectively.
Listed financial assets held for more than a year will be classified as long term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term.

No Indexation Benefits on Property Sales

The indexation benefits of property sales have been disallowed and the LTCG has been reduced from 20% to 12.5%.
To know more about it, contact our tax experts

Inflation refers to the overall increase in the prices of goods and services in an economy over time. Inflation reduces the purchasing power of money, which means that over time, the same amount of money can buy fewer goods and services. For example, if you bought two units of goods for Rs 100 today, tomorrow, only one unit might be available for Rs 100 due to inflation. Cost inflation index is a tool used to estimate the increase in the prices of goods and services every year due to inflation. The Cost Inflation Index (CII) for the financial year 2023-24 is 348.

Update - The Cost Inflation Index (CII) for the FY 2023-24 is 348. CII for FY 2024-25 has been set at 363 by the Central Board of Direct Taxes (CBDT).

What is Cost Inflation Index?
Cost Inflation Index Table from FY 2001-2002 to FY 2023-2024
How is Cost Inflation Index used in Income Tax?
How to Calculate Cost Inflation Index
What is the Purpose of Cost Inflation Index?
What is Base Year in Cost Inflation Index?
Why Base Year is Important in Cost Inflation Index?
How Can Indexation Lower Assesses’ Tax Liabilities on LTCG
Frequently Asked Questions

What is Cost Inflation Index?

Cost Inflation Index (CII) is a tool used in India to adjust the purchase price of an asset for inflation, as inflation can impact the cost of an asset over time. CII is used to adjust the purchase price of an asset for inflation so that the actual inflationary gain or loss can be accurately determined when the asset is sold.

The CII is used to compute long-term capital gains tax in India. Long-term capital gains arise when an asset is sold after being held for more than a specified period. The CBDT announces the CII for a particular financial year before the start of the financial year.

Cost Inflation Index Table from FY 2001-2002 to FY 2023-2024

Find the updated CII Table from the Financial Year 2001-02 (Base Year) to FY 2023-24 below:-

S.No.	Financial Year	Cost Inflation Index
1	2023-24	348
2	2022-23	331
3	2021-22	317
4	2020-21	301
5	2019-20	289
6	2018-19	280
7	2017-18	272
8	2016-17	264
9	2015-16	254
10	2015-16	240
11	2013-14	220
12	2012-13	200
13	2011-12	184
14	2010-11	167
15	2009-10	148
16	2008-09	137
17	2007-08	129
18	2006-07	122
19	2005-06	117
20	2004-05	113
21	2003-04	109
22	2002-03	105
23	2001-02 & Base Year	100

How is Cost Inflation Index used in Income Tax?

The Cost Inflation Index (CII) serves as a crucial metric utilized by the Indian government to estimate inflation on an annual basis. It plays a pivotal role in adjusting the purchase price of an asset for inflation, thereby ensuring fair taxation in the realm of capital gains.

In practical terms, the CII is employed in income tax calculations to modify the purchase price of an asset, effectively reflecting the impact of inflation when computing capital gains tax. By utilizing the CII, taxpayers can mitigate the impact of inflation on their taxable gains, resulting in a more equitable taxation system.

This adjustment facilitated by the CII has a tangible effect on the tax liability of taxpayers, particularly concerning long-term capital gains. As the inflated purchase price lowers the capital gains amount subject to taxation, taxpayers find themselves facing a reduced tax burden on their long-term capital gains.

How to Calculate Cost Inflation Index

If you acquired a property in 2005 for ₹20,00,000 and subsequently sold it in the financial year 2023-24, consider the Cost Inflation Index (CII) values as follows:

CII for FY 2005-06 = 117
CII for FY 2023-24 = 348

The indexed cost of acquisition for the property can be calculated as:

Indexed Cost of Acquisition = (CII for FY 2023-24 / CII for FY 2005-06) * Cost of Acquisition

Substituting the given values:

Indexed Cost of Acquisition = (348 / 117) * 20,00,000
= 5,948,717.94

Therefore, the indexed cost of acquisition of the property would be approximately 5,948,717.

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What is the Purpose of Cost Inflation Index?

In the realm of accounting, companies typically record long-term capital assets, such as machinery, at their original cost price in their balance sheets. However, over time, the value of these assets may increase due to inflation, rendering it impractical to adjust their valuation in the accounting books.

When such capital assets are eventually sold, the sale price often exceeds the original cost price, leading to substantial long-term capital gains. Consequently, the taxpayer becomes liable to pay a higher long-term capital gains tax on the profit derived from the sale.

To address this issue and ensure fair taxation, the concept of the Cost Inflation Index (CII) is instrumental. The CII methodology extends to capital gains, enabling taxpayers to adjust the purchase price of capital assets in accordance with the sale price. This adjustment mechanism effectively mitigates the impact of inflation on the taxable gains, allowing taxpayers to demonstrate lower long-term capital gains and thereby reducing their tax liability.

By incorporating the CII into capital gains calculations, taxpayers can accurately reflect the erosion of purchasing power over time. This approach ensures that the taxation system remains equitable, as it taxes individuals or businesses based on their real gains rather than nominal ones. Ultimately, the utilization of the CII in capital gains taxation aligns with principles of fairness and economic efficiency, promoting a more balanced and transparent tax regime.

What is Base Year in Cost Inflation Index?

India uses a Cost Inflation Index (CII) to account for inflation when calculating capital gains for tax purposes. This index is based on a specific "base year," which was most recently changed from 1981 to 2001. This means that the CII for the financial year 2001-2002 is considered 100, and the CII for all other years is calculated relative to this starting point.

Why Base Year is Important in Cost Inflation Index?

The choice of the base year in the Cost Inflation Index (CII) is important as it serves as the reference point for determining the CII in subsequent years. This standardized approach in selecting the base year ensures an accurate reflection of the impact of inflation on the indexed acquisition cost.

Alterations to the base year can exert a substantial influence on the computation of the Cost Inflation Index. In the case of India, the shift in the base year from 1981 to 2001 resulted in resetting the CII for 2001-02 to 100. This adjustment has implications for the calculation of the indexed acquisition cost, particularly for assets procured before 2001, potentially leading to variations in capital gains tax liabilities.

How Can Indexation Lower Assesses’ Tax Liabilities on LTCG

The utilization of the Cost Inflation Index (CII) in capital gains taxation aims to adjust the purchase price of capital assets against their sale value, thus providing a more accurate reflection of the real gains accrued over time. This adjustment process yields two essential figures: the Indexed Cost of Acquisition and the Indexed Cost of Improvement.

The formulas for calculating these indexed costs are as follows:

Indexed Cost of Acquisition: Cost Inflation Index (CII) for the year of asset transfer (sale) / CII for the first year of the asset purchase or year 2001-02, whichever is later X cost of acquisition

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Frequently Asked Questions

Q- What is the cost inflation index for FY 2023-24?

The cost inflation index for FY 2023-24 is 348.

Q- What is the cost inflation index for FY 2017-18?

The cost inflation index for FY 2017-18 is 272.

Q- How do you calculate the cost inflation index of a property?

Indexed cost of a property = Cost of Acquisition * CII of the year of transfer/ CII of the year of acquisition

Q- What is the cost inflation index for FY 2019-20?

The cost inflation index for FY 2019-20 is 289.

Q- What is the indexing rate for 2019?

The indexing rate for 2019 is 289.

Q- How do you calculate the inflation index?

The inflation index is issued by the government of India every year via the Finance budget.

Q- What is the base year of the cost inflation index?

As per income tax law, the base year for the Cost Inflation Index is FY 2001-02. Previous to the amendment made by the Finance Act 2017, the base year was 1981-82.

Q- What did Budget 2024 propose in regard to removal of indexation benefits for properties?

The Budget 2024 has proposed removing indexation benefits on capital gains from the sale of long-term capital assets. Previously, property owners adjusted their purchase prices for inflation, reducing taxable profits. The tax rate on long-term capital gains for both financial and non-financial assets has been reduced from 20% to 12.5%. However, the indexation benefit for the sale of long-term assets has been removed. As a result, any sale of long-term assets after July 23, 2024, will be taxed at 12.5% without the indexation benefit.

Individuals can still use the fair market value (FMV) as the cost of acquisition for assets purchased on or before April 1, 2001, when selling these assets.

The amendment to Finance Bill 2024 announced the restoration of indexation benefits on immovable property purchased before 23rd July 2024 for individuals and HUFs only for the purpose of computing tax. In other words, individuals can now choose between a 12.5% tax rate without an indexation benefit and a 20% tax rate with an indexation benefit.

Q- Is investing in another house property the only way to save LTCG tax on the sale of property? If not explain the other ways and how it works?

If you reinvest your capital gains in another property within a specified time period, you can claim an exemption under the following sections -

Section 54: If the gains from selling a residential house are reinvested in another house property within 1 year before or 2 years after the sale date, or if the new property is constructed within 3 years from the sale date, the entire amount is exempt from tax.
Section 54F: If the gains from selling any long-term asset are reinvested in a residential property within 1 year before or 2 years after the sale date, or if the new property is constructed within 3 years from the sale date, the entire amount can be claimed as a tax exemption.

However, there are other ways to save tax on LTCG from sale of property too. Given below are the alternative methods -

Section 54EC Exemption: Invest capital gains in NHAI, REC, IRFC, or PFC bonds within 6 months of the sale for full tax exemption.
Section 54GB Exemption: Reinvest proceeds from the sale of residential property into eligible start-ups within the specified timeframe to claim an exemption.
Capital Gains Account Scheme (CGAS): If you can't invest in a new property immediately, deposit the gains in CGAS. The amount must be reinvested in a new house within 2 years to maintain the exemption. If not used within this period, the LTCG will be taxed in the year the gains were realized.

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