The Central Board of Direct Taxes (CBDT) has notified the provisional cost inflation index for the Financial Year 2023-2024 or the Assessment Year 2024-2025 and subsequent Assessment Years.
The Notification No. 21/2023 stated as follows: –
“In exercise of the powers conferred by clause (v) of the Explanation to Section 48 of the Income Tax Act, 1961, the Central Government hereby makes the following further amendments in the notification of the Government of India, Ministry of Finance (Department of Revenue), Central Board of Direct Taxes (CBDT), published in the Gazette of India, Extraordinary, vide number S.O. 1790(E), dated the June, 2017, namely”:-
Financial Year – 2023-24
Cost Inflation Index (provisional) – 348
It was further clarified that this notification shall come into force with effect from the 1st day of April, 2024 and shall, accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.
Thc principal notification was published in the Gazette of India, Extraordinary, part 11, Section 3, Sub-section (ii), vide number S.O. 1790(E), dated the 5th June, 2017 and last amended by the notification number S.O 273S(E), dated the 14th June, 2022.
Cost Inflation Index (CII) is a measure of inflation that is used to calculate long-term capital gains on assets such as real estate, stocks, and mutual funds. It is an index that is published by the Indian government’s Central Board of Direct Taxes (CBDT) every financial year.
The CII is used to adjust the purchase price of an asset for inflation, thereby reducing the amount of capital gains tax that an individual or a company has to pay. The calculation of capital gains using the CII helps to ensure that the gains are calculated on the basis of the real value of the asset, after adjusting for inflation.
The CII is based on the Wholesale Price Index (WPI) of India, which measures the average change in the prices of goods sold in bulk. The CBDT updates the CII every financial year based on the WPI of the previous year.
The CII is particularly important for individuals and companies who have held an asset for a long period of time, as it helps to calculate the tax liability on the capital gains earned from the sale of that asset.
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