Indexed cost of acquisition or improvement

Indexed cost of acquisition formula or improvement plays an important role while calculating Capital gains Tax on long-term capital assets. For the purpose of hassle-free calculation of the indexed cost of acquisition using the Tax2Win calculator -Indexed cost of acquisition or improvement.

Indexed cost can simply mean inflated cost. Indexed cost of acquisition means the cost of acquisition is to be increased by the inflation index factors known as cost inflation index numbers.

The indexed cost of acquisition or improvement calculator is a handy tool to calculate the increased cost of acquisition for the calculation of long-term capital gain tax. Indexed cost of acquisition or improvement plays an important role while calculating Capital gains Tax on long-term capital assets.

To calculate the indexed cost of acquisition, one needs the year of acquisition and the actual cost of acquisition; this can be calculated as follows: -

Indexed cost of acquisition
= Cost of acquisition X (CII of the year of transfer / CII of the year of acquisition or FY 2001-02, whichever is later)

Indexed cost of improvement
= Cost of improvement X (CII of the year of transfer / ClI of the year of improvement or FY 2001-02, whichever is later)

*CII means cost inflation index The Income Tax Department notifies CII for each financial year.

The calculation provided by the calculator can leave assessees with a surplus after-tax payments on long-term profits, which they can then invest in other financial assets with criteria for Using Indexed Cost of acquisition or Improvement Calculator.

INDEX COST OF ACQUISITION is a benefit provided to the assessee on gains on long-term capital assets. By indexing the cost, inflation adjustment is done by which cost is increased, which results in lower capital gain tax. To avail of this reduction in taxes, the capital assets on which the capital gains are taxed should be held for more than 36 months with the assessee; however, in certain cases, this period of holding is different from 36 months, like in the case of unlisted equity shares or land and building it is 24 months while in case of Listed equity shares, it is 12 months only. Still, these are not indexed for the calculation of section 112A. So those individuals who fulfill these criteria can use this calculator.