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How to use the Cost Inflation index (CII): latest value and historical rates

This article shows the latest as well CII value and shows you how to use it for calculating capital gains tax.

How to use the Cost Inflation index (CII): latest value and historical rates


29 Jun 2022 - Contact Sayan Sircar
5 mins read

This article shows the latest as well CII value and shows you how to use it for calculating capital gains tax.

How to use the Cost Inflation index (CII): latest value and historical rates

Table of Contents

Understanding the Cost Inflation Index

The Cost Inflation Index (CII) is a number published by the Central Board of Direct Taxes (CBDT) for every financial year that is used to calculate capital gains on selling a capital asset like real estate, mutual funds, stocks or bonds.

The CII figure is published at the beginning of every financial year. It is used to rebase the purchase price of a capital asset, utilising the concept of indexation.

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What is the latest value of the Cost Inflation Index (CII)?

The Cost Inflation Index (CII) for FY 2022-23 (AY 2023-24) is 331

Historical Cost Inflation Index (CII) table

Serial # Financial Year CII
1 2001-02 100
2 2002-03 105
3 2003-04 109
4 2004-05 113
5 2005-06 117
6 2006-07 122
7 2007-08 129
8 2008-09 137
9 2009-10 148
10 2010-11 167
11 2011-12 184
12 2012-13 200
13 2013-14 220
14 2014-15 240
15 2015-16 254
16 2016-17 264
17 2017-18 272
18 2018-19 280
19 2019-20 289
20 2020-21 301
21 2021-22 317
22 2022-23 331

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Using the CII for calculating capital gains

The second column of the table has the financial year, which runs from 1st April to 31st March. The sale or purchase date of the asset is to be checked against this table, and the appropriate CII is to be picked up. For assets purchased before 1st April 2001, the seller has to use a government-approved valuer to determine the fair market price of the asset on 1st April 2001. In 2017, the government changed the base year for CII from 1981 to 2001.

We define the following terms:

  • purchase price or book value (BV): the original price paid at the time of purchase
  • sale price or market value (MV): the sale price of the asset
  • the cost of improvement of the asset (E): for house property, for example, this will be maintenance activities
  • CII in the financial year of purchase (CII0)
  • CII in the financial year of sale (CII1)

Indexed purchase price = BV * CII1 / CII0

Capital Gains = MV - E - Indexed purchase price

Since CII1 > CII0, Indexed purchase price > BV, meaning that the capital gains, and hence the capital gains tax you pay, is lower due to indexation.

Related:
This article gives worked-out examples for calculating capital gains for mutual funds and real estate.

Using the CII to know if 20% tax rate with indexation is better than 10% without for stocks and mutual funds

For a long-term portfolio, it might be better to have assets that are taxed debt-type over equivalent portfolios that are taxed using the 10% without indexation rule.

Read more here: Which mutual fund has lower tax - international funds at 20 percent vs domestic at 10 percent?

List of assets on which CII is applicable

Here is an indicative list of assets for whose sale you need to use CII to calculate the capital gains tax:

  • debt mutual funds
  • mutual funds where the percentage holding of Indian stocks is less than 65%. This category includes hybrid funds as well, where the 65% rule is applicable
  • mutual funds investing in international stocks
  • real estate
  • gold and gold jewelry
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This post titled How to use the Cost Inflation index (CII): latest value and historical rates first appeared on 29 Jun 2022 at https://arthgyaan.com


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