Loans
Cards
Insurance
Investment
Stock Market
Electronics Mall
CIBIL Score
Knowledge Centre
Calculators
Do not call
En
Learn how the Cost Inflation Index works to discover how CII adjusts asset costs for taxation purposes in India.
The Cost Inflation Index (CII) is an important financial and taxation metric used in India to adjust the purchase price of capital assets for inflation. It ensures that taxpayers are not unfairly taxed on gains that occur merely due to inflation. Whether you are selling property, gold, mutual fund units, or other long-term capital assets, understanding the CII helps you calculate capital gains accurately and reduce your tax liability.
The Cost Inflation Index (CII) is a measure released annually by the Government of India to show how much the general price level (inflation) has increased compared to a base year. It helps compute inflation-adjusted (indexed) cost of acquisition and improvement for calculating long-term capital gains (LTCG) under the Income Tax Act.
In simple terms, CII helps convert historical asset prices into present-day values based on inflation. The higher the inflation, the higher the CII—and therefore, the lower your taxable capital gain.
CII is used to:
Adjust the purchase price of assets for inflation
Compute fair long-term capital gains
Protect taxpayers from paying tax on inflation-driven gains
Maintain transparency and fairness in capital gains taxation
Provide an objective standard for indexation across different years
Without the Cost Inflation Index, individuals would pay tax on gains that are not real gains but simply the result of rising prices.
Below is the most recent CII table (Base Year: 2001–02 = 100):
| Financial Year | CII Value |
|---|---|
2017–18 |
272 |
2018–19 |
280 |
2019–20 |
289 |
2020–21 |
301 |
2021–22 |
317 |
2022–23 |
331 |
2023–24 |
348 |
2024–25 (Latest) |
363 |
Note: These values are notified every year under the Income Tax Act.
The general formula for indexation is:
Indexed Cost of Acquisition = (Cost of Acquisition × CII of Year of Sale) ÷ CII of Year of Purchase
Indexed Cost of Improvement = (Cost of Improvement × CII of Year of Sale) ÷ CII of Year of Improvement
Components:
Cost of Acquisition: Original purchase price
CII (Year of Purchase): Index value for the year you bought the asset
CII (Year of Sale): Index value for the year you sold the asset
Follow these steps:
Find the year of purchase and year of sale
Check the CII values for both years
Apply the indexation formula
Compute indexed cost
Subtract indexed cost from sale value to get long-term capital gains
Suppose you bought a plot of land for ₹10,00,000 in 2010–11 (CII = 167) and sold it in 2024–25 (CII = 363) for ₹35,00,000.
Indexed Cost
= ₹10,00,000 × (363 ÷ 167)
= ₹10,00,000 × 2.174
= ₹21,74,000 (approx.)
Capital Gain
= Sale Price – Indexed Cost
= ₹35,00,000 – ₹21,74,000
= ₹13,26,000
Thus, indexation reduces taxable capital gain significantly—from ₹25,00,000 (without indexation) to ₹13,26,000.
Below is a quick reference for historical CII values (base year 2001–02 = 100):
| Year | CII | Year | CII |
|---|---|---|---|
2001–02 |
100 |
2013–14 |
220 |
2005–06 |
117 |
2014–15 |
240 |
2009–10 |
148 |
2015–16 |
254 |
2011–12 |
184 |
2016–17 |
264 |
Several economic and policy variables influence how the Cost Inflation Index (CII) changes each year:
Changes in consumer price inflation
Economic conditions
RBI monetary policy
Government fiscal policy
Changes in the cost of goods and services
Revisions to base year
CII plays an important role in:
Long-term capital gains taxation
Ensuring taxpayers pay tax only on real gains
Providing relief during high-inflation periods
Relevant for long-term investment assets
Offering clarity in asset valuation for taxation
For assets held long term (like real estate), CII significantly reduces tax liability.
The following may restrict the effectiveness of the Cost Inflation Index:
It uses general inflation, not asset-specific inflation
Indexation benefits do not apply to short-term capital gains
Can be revised by the government, creating inconsistencies
Some financial instruments do not qualify for indexation
The Cost Inflation Index (CII) plays a vital role in ensuring fair long-term capital gains taxation in India. By adjusting the purchase cost for inflation, it prevents taxpayers from being taxed on nominal gains and offers a more accurate picture of real profits. For anyone dealing with real estate or long-term capital assets, understanding CII is essential for correct tax planning and compliant reporting.
Key takeaways:
Adjusts purchase cost to account for inflation
Helps calculate long-term capital gains accurately
Prevents taxation on inflation-driven gains
Essential for real estate and other long-term asset transactions
Supports tax planning and financial decision-making
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
The cost inflation index represents a measure used to adjust the purchase cost of assets for inflation so that long-term capital gains can be calculated more accurately under tax rules.
The cost inflation index in India is released each financial year by the Central Board of Direct Taxes, which notifies the updated value through official publications.
The cost inflation index for the financial year 2024–25 is 363, reflecting the inflation-adjusted benchmark used for computing indexed asset costs for that period.
A cost inflation index calculator is an online tool that applies the notified index values to determine the inflation-adjusted cost of an asset, helping users compute the indexed cost for capital gains calculations.
The cost inflation index uses 2001–02 as the base year, assigning it a base value of 100 so that subsequent index values can measure inflation in relation to that starting point.
.jpeg)
80786
Unlock the world of credit! From picking the perfect card to savvy loan management, navigate wisely.
45136
Money Management and Financial Planning covers personal finance basics, setting goals, budgeting...
21874
Explore the investment cosmos! From beginner's guides to sharp-witted strategies, explore India's treasure trove of options.
34918
Navigate the tax maze with ease! Uncover Income Tax 101, demystify jargon with Terms for Beginners, and choose between Old or New Regimes.
10431
Discover essential insights on various types of insurance in India.
4424
Welcome to Tech in Finance, where we explore the exciting intersection of technology and finance...
Personal Loan, Business Loan, Collateral
Credit Score, Report & Analysis
Fixed Deposit, Mutual Fund, NPS, Demat A/C, SGB
General Insurance, Life Insurance, Term Insurance
Stocks, IPOs
Smart Phone, Speaker, EarPhone
Academy 
.jpeg "image not found")
