Cost Inflation Index

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  • Last Updated on 1 February, 2021

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Purchasing power of money decreases with increase in inflation which results in increase in prices of goods. Indexed cost allows assessee to claim higher deduction in respect of cost of the asset by taking inflated cost while calculating capital gains.
 
The overall cost of acquisition is adjusted per the prevailing Cost Inflation Index for the year and the year in which acquisition took place.

Steps to Calculate the Indexed Cost of Acquisition:

We must follow two step approach to calculate the Indexed Cost of acquisition. Step1 – Calculate the Cost of Acquisition of Capital Assets. Step2 – Multiply Cost of Acquisition with Cost Inflation Index of the year when the asset was transferred and divide it by Cost Inflation Index of the year in which the asset was first held by the assessee. In case the Asset was acquired before 2001, then Cost Inflation Index of 2001-02 need to be used in place of Cost Inflation Index of the year in which the asset was first held by the assessee. 

 

Indexed Cost of Acquisition

 

 

  =

 

 

 

Cost of Acquisition                                 

 

 

X

 

 

 

CII of the year in which asset is transferred

 

 

 

 

CII of the year in which asset is first held by assessee or CII of 2001-02, whichever is later

 

In case asset was acquired by way of gift or inheritance etc. then base year shall be the year in which the previous owner first held the asset.
Product image
 

Table of Notified CIIs:

Financial Year

CII

Financial Year

CII

2001-02

100

2011-12

184

2002-03

105

2012-13

200

2003-04

109

2013-14

220

2004-05

113

2014-15

240

2005-06

117

2015-16

254

2006-07

122

2016-17

264

2007-08

129

2017-18

272

2008-09

137

2018-19

280

2009-10

148

 

 

2010-11

167

 

 

The benefit of indexation shall not be available in case of transfer of long-term capital asset, being listed equity shares, units of equity oriented mutual funds or units of business trust, or any transfer of a bond or debenture if the capital gain is taxable under Section 112A.
 
 
Depreciable Assets are always deemed as short-term capital assets. Thus, no indexation benefits shall be available on such assets and where a non-resident acquires shares or debentures of an Indian company in foreign currency, scheme of indexation does not apply.
 
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