- Any stock, consumables or raw material, held for business or profession
- Personal goods such as clothes and furniture held for personal use
- Agricultural land in rural India
- 6½% gold bonds (1977) or 7% gold bonds (1980) or national defence gold bonds (1980) issued by the central government
- Special bearer bonds (1991)
- Gold deposit bond issued under the gold deposit scheme (1999) or deposit certificates issued under the Gold Monetisation Scheme, 2015
- Investment
- speculation.
The cost of inflation index (CII) for the financial year 2020-21 has been notified by the Ministry of Finance. The ministry has set the Cost Inflation Index FY 2020-21 as 301. For the previous FY 2019-20, CII value was 289.
| Sl. No. | Financial Year | Cost Inflation Index | Sl. No. | Financial Year | Cost Inflation Index |
| 1 | 2001-02 | 100 | 11 | 2011-12 | 184 |
| 2 | 2002-03 | 105 | 12 | 2012-13 | 200 |
| 3 | 2003-04 | 109 | 13 | 2013-14 | 220 |
| 4 | 2004-05 | 113 | 14 | 2014-15 | 240 |
| 5 | 2005-06 | 117 | 15 | 2015-16 | 254 |
| 6 | 2006-07 | 122 | 16 | 2016-17 | 264 |
| 7 | 2007-08 | 129 | 17 | 2017-18 | 272 |
| 8 | 2008-09 | 137 | 18 | 2018-19 | 280 |
| 9 | 2009-10 | 148 | 19 | 2019-20 | 289 |
| 10 | 2010-11 | 167 | 20 | 2020-21 | 301 |
How to Calculate the Indexed cost of purchase or indexed cost of Acquisition?
The indexed cost is calculated with the help of a table of cost inflation index as given above.
Divide the cost at which you purchased the Property/Investment by the index as on the date of the purchase. Multiply this by the index as on the date of sale.
Indexed cost of Acquisition = Original cost of acquisition * (CII of the year of sale/CII of year of purchase)
Let’s say you have invested in a debt fund in August 2014. Your investment amount was Rs 2,00,000 (20,000 units @ Rs 10 each). Six years later, you redeemed your investments in July 2020, at a value of Rs 3,00,000 (20,000 units @ Rs 15 each).
Hence, when you sold your investments, the value of your investments was Rs 3,00,000. Your investment made capital gains worth Rs 1,00,000. However, you need not pay tax on this entire amount of Rs 1,00,000.
All you need to do is apply the formula.
- The cost of acquisition is Rs 2 lakh.
- CII number for purchase year (2014-15) was 240.
- CII during sale year (2020-21) is 301.
This would mean that your indexed cost price of acquisition would be – (2,00,000 * 301/240) = Rs 2,50,833.
As again, your long term capital gains would come down to Rs. 49,167 (Rs 3,00,000- Rs.2,50,833), you will be taxed 20% of this amount (as compared to Rs 1,00,000 without indexation) which will again, greatly reduce your tax obligations.
Thus, with Indexation, you can enjoy the benefits of your own investments without losing an excessive amount of taxes.
