The Central Government, in exercise of the powers conferred by section 72(8)(a) of the Income-tax Act, 2025, has issued Notification No. 85/2026-Income Tax dated 15th July, 2026 specifying the Cost Inflation Index for the Financial Year 2026-27. As per the notification, the Cost Inflation Index for the Financial Year 2026-27 is 384. The notification further provides that it shall apply to the tax year 2026-27 on and from 1st April, 2026 and to subsequent tax years.
What is the Cost Inflation Index (CII) and Why is it Important?
The Cost Inflation Index (CII) is a government-notified index used to adjust the cost of acquisition and the cost of improvement of certain capital assets for inflation while computing capital gains. By indexing the original cost, the Income-tax Act ensures that taxpayers are taxed only on the real gain arising from appreciation in the asset’s value and not on the portion attributable merely to inflation.
The CII plays a significant role in the computation of indexed cost, which is deducted from the sale consideration while calculating taxable capital gains wherever indexation benefits are available under the Income-tax Act. A higher CII generally results in a higher indexed cost, thereby reducing the taxable capital gains and the corresponding tax liability.
For Financial Year 2026-27, the Central Government has notified the Cost Inflation Index at 384 under Section 72(8)(a) of the Income-tax Act, 2025. This index will apply for Tax Year 2026-27 and subsequent tax years, effective from 1 April 2026, wherever the provisions relating to indexation are applicable.
(Department Of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
Notification No. 85/2026-Income Tax | Dated: 15th July, 2026
S.O. 3889(E).— In exercise of the powers conferred by section 72(8)(a) of the Income-tax Act, 2025 (30 of 2025), the Central Government hereby specifies the Cost Inflation Index as mentioned in column (3) of the Table below for the Financial Years mentioned in the corresponding entry in column (2) of the said Table, namely:–
TABLE
| Sl. No. | Financial Year | Cost Inflation Index |
| (1) | (2) | (3) |
| 1. | 2026-27 | 384. |
2. This notification shall apply to the tax year 2026-27 on and from the 1st day of April, 2026 and subsequent tax years.
[F. No. 85/2026/F.No.370149/112/2026-TPL]
KRITIKA JAIN, Under Secy.
