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.
The CII figure may be taken as a proxy for inflation. To understand how CII models inflation, have a look at how the value of ₹1,000 has changed over the years as per CII changes.
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What is the value of ₹1000 today as per the latest CII value?
The value of something that cost ₹1000 in FY 2001-02 would be around ₹ 3630 today.
Since the index started in FY 2001-02, we can think that the value of the Rupee has steadily decreased as per the change in the CII index. If the value of something was ₹100 when CII was 200, then that item should cost around ₹150 when CII rises to 300 (150 = 100 * 300/200). This is of course an approximation. The actual increase would depend on the product and the time period considered.
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As the above table shows, it is easy to calculate the indexed purchase price. In the table above, an asset purchased in FY 2008-09 (CII = 137) and being sold in FY 2017-18 (CII = 272), will have an indexed purchase price of ₹198.54.
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This post titled What is the latest Cost Inflation Index (CII) value in 2023? first appeared on 13 Apr 2023 at https://arthgyaan.com
