CBDT has notified the ‘Cost Inflation Index (CII)’ for FY 2021-22 (AY 2022-23) at 317 for determining ‘long term capital gains (LTCG)’ under Income Tax, as against 301 for FY 2020-21 (AY 2021-22. The Indexation Chart/ Table for Capital Gains/ Cost Inflation notified by CBDT for different years is based on new base year 2001-02.
It may be noted that the Finance Act 2017 has amended ‘cost inflation index’ provisions, i.e. relating to indexation for determining long term capital gains (LTCG). The Base year has been shifted from FY 1981-82 to FY 2001-02. The assessees can now exercise option to use Fair Market Value (FMV)/ Indexed Cost of Acquisition for arriving at the figure of LTCG, regarding assets acquired prior to 01/04/2001.
Cost Inflation Index Chart/ Table with base Year 2001-02 (Applicable for FY 2001-02 to FY 2021-22)
Here is the summary of Cost Inflation Index (CII) notified by CBDT for different 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) |
| 1 | 2001-02 | 100 |
| 2 | 2002-03 | 105 |
| 3 | 2003-04 | 109 |
| 4 | 2004-05 | 113 |
| 5 | 2005-06 | 117 |
| 6 | 2006-07 | 122 |
| 7 | 2007-08 | 129 |
| 8 | 2008-09 | 137 |
| 9 | 2009-10 | 148 |
| 10 | 2010-11 | 167 |
| 11 | 2011-12 | 184 |
| 12 | 2012-13 | 200 |
| 13 | 2013-14 | 220 |
| 14 | 2014-15 | 240 |
| 15 | 2015-16 | 254 |
| 16 | 2016-17 | 264 |
| 17 | 2017-18 | 272 |
| 18 | 2018-19 | 280 |
| 19 | 2019-20 | 289 |
| 20 | 2020-21 | 301 |
| 21 | 2021-22 | 317 |
New Cost Inflation Index for FY 2021-22/ AY 2022-23 at 317: CBDT Income Tax Notification 73/2021 dt. 15/06/2021
S.O. 2336(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 the 5th June, 2017, namely:-
2. In the said notification, in the Table, after serial number 20, the following serial number and entries relating thereto, shall be inserted, namely:-
| Sl. No. | Financial Year | Cost Inflation Index |
| (1) | (2) | (3) |
| 21 | 2021-22 | 317 |
3. This notification shall come into force with effect from 01/04/2022 and shall accordingly apply to the Assessment Year 2022-23 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 5th June, 2017 and was last amended vide S.O. 1879 (E) dated 12th June, 2020.
Relevance of Cost Inflation Index (CII)?
In the case of transfer of short term capital asset, the amount of capital gains can be arrived at by deducting the ‘cost of acquisition/ improvement’ from the ‘sale consideration’. However, in the case of transfer of long term capital asset, capital gains are determined by deducting ‘indexed cost of acquisition/ improvement’ from the ‘sale consideration’.
‘Cost Inflation Index’ basically means the index notified by the Central Govt. with reference to average rise in the ‘consumer price index’, during the year immediately preceding the relevant previous year. However, ‘indexed cost of acquisition’ is arrived at by multiplying the ‘cost of acquisition’ with the change in ‘cost inflation index’ since the year of acquisition or 1 April, 2001 whichever is later.
Accordingly, the ‘Cost Inflation Index’ for FY 2020-21 (new CII) is useful for working out the ‘long term capital gains (LTCG)’ during FY 2021-22, from transfer of long term capital asset, i.e. ‘sale consideration’ minus ‘indexed cost of acquisition/ improvement’.
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
Given the fact that commodity prices are volatile and hence CPI/ WPI can turn out to be materially different during the year, how does CBDT decide Cost inflation index at the start of a financial year? Is the cost inflation index subject to revision at the end of the year??
As you know CII is declared by CBDT based on CPI. So there is an auto correction feature (year on year) included in the process, since CPI calculation itself takes into account many parameters. Back to the point, CII is a notional figure which is worked out/ declared by CBDT at the early stage of a financial year. In fact there is no need to declare revised CII for any financial year even if there is a substantial inflation in the later part of that year. There are various scenarios where you can’t fit an actual inflation index for working out capital gains. Suppose an asset is acquired on 31/03/2017 and sold out on 10/04/2020, the inflation concerned may be of 3 years but the assessees will get benefit of indexation of 5 years under this system.
In case an asset is purchased prior to 01/04/2001 (let’s say in 1998), then how the indexed cost will be worked out?
In Finance Act 2017, base year has been shifted from 1981 to 2001. However, in case the asset has been purchased upto/ before 01/04/2001, cost of acquisition can be taken as fair market value (FMV) as on 01/04/2001 (in lieu of the original cost in 1998), which shall be subjected to indexation benefit as per above circular.
Is there any change in the formula for calculating the indexed cost using the CII, after shifting of base year to 2001?
To work out the long term capital gains/ losses, index cost (including for improvements) is reduced from the sale consideration. Indexed cost of acquisition/ improvement of an asset can be calculated using the ‘Cost Inflation Index (CII)’ notified by the CBDT from time to time. Formula for calculating the indexed cost/ improvement remains the same:
Indexed cost of acquisition/ improvement = actual purchase price/ actual improvement cost * cost inflation index applicable for the year of sale / cost inflation index applicable for the year of purchase
I gave the site for development and the developer obtained the occupation certificate on 01/12/2020 (FY2020-21). Now, I plan to sell one of the flat of my share after 01/12/2021 (FY2021-22). Please clarify will the profit come under LTCG and in which year?
Whether CII can be used for depreciable assets also, like Plant and Machinery?
In the case of a depreciable asset like Plant and Machinery, which forms part of a block of asset, any capital gain/ loss arising from the transfer thereof shall be treated as short-term capital gain/ loss, i.e. no indexation benefit available.
In case the Land was purchased prior to 2001 and Construction was completed in 2010 and Building was sold out in 2015, how the indexed cost of acquisition will be worked out?
We are two brothers. We inherited a property in 2015, which was originally split of land purchase by our father and subsequently a house was built upon it by him in 1986. The cost of the house was around 15 lakhs at that time. One of the brothers later constructed a house from his own resources on the roof of the said house, incurring a cost of about 40 lakhs. We are now selling off the property for 4 cr. How to calculate LTCG?
Applied in 1981 but DDA allotted the plot in 2012. However payment was made in 2018. From where the indexed cost rules applies for the purpose of capital gains?
How to obtain fair market value (FMV) of the property purchased in 1990. Also, if it’s undivided share of land registered at the time of registration, how to calculate the FMV?