Cost Inflation Index (CII) for FY 2022-23: CBDT Notification 62/2022

The CBDT has announced that the ‘Cost Inflation Index (CII)‘ for FY 2022-23 (AY 2023-24), which is used for calculating ‘long term capital gains (LTCG)’ under Income Tax, will be 331 (base year 2001-02). This number is up from 317 for FY 2021-22. (AY 2022-23).

Notably, the Finance Act 2017 modified the provisions relating to the ‘cost inflation index,’ i.e. indexation for calculating long-term capital gains (LTCG). Fiscal year 1981-82 has been replaced by fiscal year 2001-02. Assessees have the option of calculating LTCG using Fair Market Value (FMV)/Indexed Cost of Acquisition for assets acquired prior to April 1, 2001.

CBDT Notifies Cost Inflation Index: CII Chart from base year 2001-02 onwardsWhen it comes to calculating the amount of income tax that must be paid on long-term capital gains, the cost inflation index is an extremely helpful tool. The fact that it takes into account the effects of inflation on the initial purchase price of the asset is the primary advantage of utilising the cost inflation index. This is especially the case if the asset was purchased a very long time ago, and the current market value of the asset is significantly greater than the price at which it was originally purchased. If there was no cost inflation index, taxpayers would be subject to an unfair level of taxation on their capital gains.

Long-term capital gains are defined as any profits made from the sale of an asset that has been owned for a period of time that is greater than three years normally. When calculating the amount of tax that must be paid on a long-term capital gain, the cost of the asset’s initial purchase as well as any subsequent improvements must be adjusted for inflation. The utilisation of the cost inflation index serves to accomplish this goal. An instrument utilised by the government for the purpose of calculating inflation is the cost inflation index. By utilising the cost inflation index, taxpayers have the ability to ensure that they are paying the appropriate amount of tax on their capital gains.

Cost Inflation Index (CII) Table/ Capital Gain Indexation Chart (Base Year 2001-02)

The Capital Gains/Cost Inflation Indexation Chart or Table, as notified/amended by CBDT from time to time, is based on the new base year 2001-02 and covers all financial/assessment years up until 2022-23/2023-24, respectively. Here is a summary of the CBDT-notified Cost Inflation Index (CII) for various years, i.e. Indexation Chart/ Table, Capital Gains Index/ Chart/ Table, Cost Inflation Index/ Chart/ Table:

SI. No.Financial Year (FY)Cost Inflation Index (CII)
12001-02100
22002-03105
32003-04109
42004-05113
52005-06117
62006-07122
72007-08129
82008-09137
92009-10148
102010-11167
112011-12184
122012-13200
132013-14220
142014-15240
152015-16254
162016-17264
172017-18272
182018-19280
192019-20289
202020-21301
212021-22317
222022-23331

New Cost Inflation Index (CII) for FY 2022-23/ AY 2023-24 at 331: CBDT Income Tax Notification 62/2022 dt. 14/06/2022

S.O. 2735(E). In exercise of the powers conferred by clause (v) of the Explanation to section 48 of the Income-tax Act, 1961 (43 of 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, published in the Gazette of India, Extraordinary, vide number S.O. 1790(E), dated 05/06/2017, namely:-

2. In the said notification, in the Table, after serial number 21, the following serial number and entries relating thereto, shall be inserted, namely:-

Sl. No.Financial YearCost Inflation Index
(1)(2)(3)
222022-23331

3. This notification shall come into force with effect from 01/04/2023 and shall accordingly apply to the Assessment Year 2023-24 and subsequent years.

Note:- The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O.1790(E) dated 05/06/2017 and was last amended vide S.O. 2336(E) dated 15/06/2021.

Relevance of Cost Inflation Index (CII)/ Capital Gain Index?

Notably, the CII applies only to long-term capital gains, i.e., gains from the sale of long-term capital assets. To calculate taxable capital gains on short-term capital assets/gains, deduct the acquisition/improvement cost from the sale price. In the case of the transfer of a long-term capital asset, however, capital gains are determined by subtracting the indexed cost of acquisition/improvement from the sale consideration.

The indexed cost of acquisition/improvement is crucial in calculating long-term capital gains because it offers a more precise representation of the asset’s cost. The CII offers a more precise estimation of an asset’s cost by taking into account how inflation affects the purchasing power of money. The Central Government therefore updates the CII annually in line with the rate of inflation. The CII is an important factor to take into account when determining the amount of tax payable on the sale of a long-term capital asset. By taking the effects of inflation into account, the CII provides a more precise measurement of the cost of an asset, leading to a more precise calculation of capital gains.

The term ‘Cost Inflation Index/Capital Gain Index’ refers to the Central Government’s notification of the average increase in the ‘consumer price index’ during the preceding year. In contrast, the ‘indexed cost of acquisition’ is computed by multiplying the ‘cost of acquisition’ by the change in the ‘cost inflation index’ since the year of acquisition or April 1, 2001, whichever is later.

This formula is used to calculate long-term capital gains resulting from the sale of any long-term capital asset. Simply put, the purchase price is adjusted for inflation prior to taxing any gains from the total sale value. The difference between this indexed cost and the asset’s sale price is taxed as long-term capital gain.

Accordingly, the ‘Cost Inflation Index/ Capital Gain Index‘ for FY 2022-23 (new CII) is useful for calculating the ‘long term capital gains (LTCG)’ arising from the transfer of a long-term capital asset during FY 2022-23, i.e. ‘sale consideration’ minus ‘indexed cost of acquisition/improvement’

Cost Inflation Index for FY 2021-22/ AY 2022-23 at 317: CBDT Income Tax Notification 73/2021 dt. 15/06/2021

Cost Inflation Index for FY 2020-21/ AY 2021-22 at 301: CBDT Income Tax Notification 32/2020 dt. 12/06/2020

Cost Inflation Index for FY 2019-20/ AY 2020-21 at 289: CBDT Income Tax Notification 63/2019 dt. 12/09/2019

Cost Inflation Index for FY 2018-19/ AY 2019-20 at 280: CBDT Income Tax Notification 26/2018 dt. 13/06/2018

Cost Inflation Index for FY 2001-02 to FY 2017-18: CBDT Income Tax Notification 44/2017 dt. 05/06/2017

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