Income Tax Dept notifies Cost Inflation Index (CII) for FY 2024-2025
This marks an increase from the previous year's index of 348 and 2022-23's index of 331
The Income Tax Department has announced the Cost Inflation Index ( CII ) for the fiscal year starting in April 2024, which will be used to calculate long-term capital gains from the sale of immovable property, securities, and jewellery. The CII, essential for adjusting gains from the sale of capital assets for inflation, has been set at 363 for the financial year 2024-25, corresponding to...
The Income Tax Department has announced the Cost Inflation Index ( CII ) for the fiscal year starting in April 2024, which will be used to calculate long-term capital gains from the sale of immovable property, securities, and jewellery.
The CII, essential for adjusting gains from the sale of capital assets for inflation, has been set at 363 for the financial year 2024-25, corresponding to the assessment year 2025-26. This marks an increase from the previous year's index of 348 and 2022-23's index of 331, as per the Central Board of Direct Taxes ( CBDT ) notification.
The CII reflects inflation in the economy, causing the prices of goods and services to rise over time. For 2023-24, the index was 348, and for 2024-25, it has been updated to 363, an increase of 15 points, corresponding to an annual inflation rate of about 4.3%. This aligns with the retail inflation rate of 4.83% recorded in April 2024.
Taxpayers typically favour a higher CII as it allows for larger tax rebates.
The CII is an important matrix as taxpayers are taxed on the real appreciation of assets rather than inflationary gains. Taxpayers can use this index to calculate gains for long-term capital assets sold during FY 24-25 and thereby reduce their tax liability.
The CII, notified annually under the Income-tax Act, 1961, is widely used to calculate the "indexed cost of acquisition" when determining capital gains at the sale of any capital asset. Assets must typically be held for more than 36 months (24 months for immovable property and unlisted shares, 12 months for listed securities) to qualify as long-term capital gains.
The CII helps compute taxable long-term capital gains ( LTCG ) by adjusting the purchasing price of assets for inflation, accounting for the rise in goods prices and the decrease in purchasing power over time.
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