Cost Inflation Index Table up to Assessment Year 2021-22

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TaxClue Team
TaxClue Team
Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building.
Land, building, house property, vehicles, machinery, shares, and jewellery are a few examples of capital assets. There are certain assets that do not fall under the definition of Capital Assets.
These assets are as follows:
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  • 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
The market of all these capital assets is speculative in nature. People buy these assets only for the following purpose
  1. Investment
  2. speculation.
The transactions in these assets are also subjected to capital gain tax. Capital gain can be of 2 types, either long term or short-term depending upon the period of holding.
The tax rate in the Long term is more than in the short term which ranges from 0% to 20%.
The other benefit of long-term asset that they can be indexed. Govt. has come out with an index table called Cost Inflation Index whose base year was fixed as 1-4-1981. In Finance Bill 2017 the Govt. has taken a very bold step and has shifted the base year from 1981 to 2001 for the benefit of investors. Also, the period of holding of land and/or building has been reduced from 36 months to 24 months.

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.

As per Notification No. So 3266(E) [No. 63/2019 (F.No. 370142/11/2019-TPL)], Dated 12-9-2019, the following table should be used for the Cost Inflation Index:
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.

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