Cost Inflation Index
Indexation Capital Gains

CII = Cost Inflation Index. NOTIFIED ANNUALLY by Income Tax Department.

Used to INDEX cost of acquisition for INFLATION when calculating LONG-TERM CAPITAL GAINS. PURPOSE: Tax only REAL gains, not inflationary gains.

CURRENT CII (FY 2026-27): 384 — notified by CBDT vide Notification No. 85/2026 dated 15 July 2026 under section 72(8)(a) of the Income-tax Act, 2025. NOTIFIED VALUES: (FY 2020-21: 301), (FY 2021-22: 317), (FY 2022-23: 331), (FY 2023-24: 348), (FY 2024-25: 363), (FY 2025-26: 376), (FY 2026-27: 384).

BASE YEAR 2001-02 = 100. APPLIES TO: property, unlisted shares, debt MF (pre-July 2024), gold, certain bonds.

INDEXATION FORMULA: INDEXED COST = COST OF ACQUISITION × (CII of SALE YEAR / CII of PURCHASE YEAR). EXAMPLE (resident individual, property bought before 23 July 2024, so both regimes are open): Property bought FY 2010-11 for ₹50L.

Sold FY 2026-27 for ₹2cr. CII 2010-11 = 167.

CII 2026-27 = 384. (a) Indexed cost: ₹50L × 384/167 = ₹1.15cr. (b) LTCG with indexation: ₹2cr − ₹1.15cr = ₹85.03L. (c) Without indexation the gain is the full ₹2cr − ₹50L = ₹1.5cr. (d) BENEFIT: ₹64.97L lower taxable gain. (e) Tax: 20% × ₹85.03L = ₹17.01L WITH indexation, versus 12.5% × ₹1.5cr = ₹18.75L WITHOUT it — indexation wins by ₹1.74L. NOTE the rates differ between the two columns: the un-indexed regime is 12.5%, NOT 20%.

Both figures are before the 4% Health & Education Cess.

POST-JULY 2024 BUDGET — MAJOR CHANGE: (1) INDEXATION REMOVED for property + unlisted shares: NEW rate 12.5% WITHOUT indexation (vs old 20% WITH indexation). (2) GRANDFATHERING: properties bought BEFORE July 23, 2024 — TAXPAYER CHOICE of OLD 20% with indexation OR NEW 12.5% without. (3) DEBT MUTUAL FUNDS: post-July 2024 — slab rate, NO indexation. (4) UNLISTED SHARES: 12.5% LTCG, no indexation. STRATEGIC: Pre-July 2024 property: calculate both ways + choose lower tax.

GRANDFATHERING (Finance (No. 2) Act 2024, for RESIDENT individuals and HUFs only, land or buildings only): (1) PROPERTIES BOUGHT BEFORE July 23, 2024: SALE during transition — TAXPAYER CHOICE. (2) OLD RULE: 20% LTCG with indexation. (3) NEW RULE: 12.5% LTCG without indexation. (4) Choose LOWER tax. (5) EXAMPLE: Property cost ₹50L (2010), sold ₹2cr (2026). (a) Old: indexed cost ₹1.04cr, LTCG ₹96L, tax 20% = ₹19.2L. (b) New: LTCG ₹1.5cr, tax 12.5% = ₹18.75L. (c) NEW slightly better. (d) FOR HIGH-APPRECIATION properties (5x+ growth): new often better. (e) FOR LOW APPRECIATION: old may be better.

STRATEGY: (1) PRE-JULY 2024 PROPERTIES: calculate BOTH 20% indexed + 12.5% un-indexed. Choose lower. (2) POST-JULY 2024: simple 12.5% applies (no indexation). (3) SECTION 54: reinvest in new house — EXEMPT from LTCG. (4) SECTION 54EC: NHAI/REC bonds ₹50L cap — EXEMPT from LTCG. (5) SECTION 54F: ALL CAPITAL ASSETS sold + invest in house — EXEMPT. (6) CAGAS account: deferred reinvestment within 2-3 years. (7) UNLISTED SHARES: 12.5% LTCG, no indexation post-July 2024. (8) DEBT MF: NOT eligible for LTCG/indexation anymore.

CONSULT CA for major capital gains events.