New Delhi: The Income Tax Department has notified the cost inflation index for the current financial year from April 2023 for computing long-term capital gains arising from sale of immovable property, securities and jewellery.
Cost Inflation Index (CII) is used by taxpayers to calculate the gain from the sale of a capital asset after adjusting for inflation.
According to a notification of the Central Board of Direct Taxes (CBDT), the cost inflation index for the financial year 2023-24 was at 348 relevant to the assessment year 2024-25.
Usually the Income Tax Department notifies CII in the month of June.
The CII number for the last financial year was 331 and for the 2021-22 financial year it was 317.
Rajat Mohan, senior partner, AMRG & Associates, said CII would help taxpayers calculate long-term capital gains tax, enabling them to deposit advance tax on time.
“The cost of inflation index for this year as compared to the previous financial year has been notified by the tax department 3 months in advance. Taxpayers can now accurately and accurately calculate tax on long term gains in the first quarter of FY 2023-24 and the required Can pay advance tax,” Mohan said.
CII or Cost Inflation Index is notified every year under the Income Tax Act, 1961. It is popularly used to calculate the “indexed cost of acquisition” while computing capital gain at the time of sale of a capital asset.
Generally, an asset needs to be held for more than 36 months (24 months for fixed assets and unlisted shares, 12 months for listed securities) to qualify as ‘long-term capital gain’ .
Since the prices of goods rise over time, resulting in a decline in purchasing power, the CII is used to arrive at the inflation-adjusted purchase price of the asset to calculate taxable long-term capital gains (LTCG).